Time to Think About Tax Refunds

February 25, 2015

IM  -  

by Robert Baird, President Baird Artists Management (BAM!)

It’s a new year and it’s time to start thinking about getting a refund of taxes withheld in a foreign country by filing a nonresident tax return.

Dear Crossing Borders,

To file taxes in the US to apply for a refund, what kind of paperwork do we need to ask promoters for? Should we be receiving copies of the forms they will be sending to the IRS? It’s my understanding that we should receive a notice from the IRS early in 2015, which will summarize the total amount that we’ve had withheld over the course of 2014. Is that correct?

First of all, it is a good idea to file a nonresident tax return if and when you work in another country. In fact, it’s the only way to get a refund of taxes that may have been withheld. We will deal with the requirements for the US and Canada separately.

United States

In the US, there is no requirement to file a nonresident tax return unless tax is owing. For work done in the US, you should receive a Form 1099 from whoever engaged you to perform. The IRS will not send you a summary of the amounts withheld; it is your responsibility to file for a refund of taxes withheld. The 1099s should be attached to your US tax return.

The US tax return for nonresidents is either a Form 1040-NR or a Form 1040-NR-EZ. If you wish to claim a refund of taxes that were withheld, you need to file a Form 1040NR. However, you do not need to file Form 1040NR if:

1) Your only U.S. trade or business was the performance of personal services; and

2) Your wages were less than $3,900; and

3) You have no other need to file a return to claim a refund of over-withheld taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty.

The Form 1040NR-EZ can be used if income from US sources is wages, salaries, and tips, refunds of state and local income taxes, and scholarship or fellowship grants. In addition, you may have to file a Form 8833 to claim certain Tax Treaty rights.

All nonresident tax filings go to Department of the Treasury, Internal Revenue Service, Austin, TX  73301-0215. In order to file a nonresident US tax return you will need to have an Individual Tax Identification Number (ITIN).

Canada

You are required to file a nonresident tax return if you owe tax, if you are requested to by Revenue Canada, if you wish to claim a refund, or if you were granted a Tax Waiver. Not only is there a stiff penalty for failure to file a return, but arrears interest adds insult to injury, as it were. And, if you applied for and were granted a waiver in Canada, then a tax filing is required before further waivers will be considered.

For individuals, this means the filing of a T-1 Non-Resident return with a Schedule A Statement of World Income attached, along with any T4A-NR slips you received from Canadian venues. You will need to apply for an Individual Tax Number (ITN) when you file.

For businesses, you must file a T2 Non-resident return along with certain Schedules, a T4A-NR Summary (if you issued any T4A-NR slips to employees or subcontractors) and any T4A-NR slips you may have received. Businesses also need to apply for a Business Number for:

• goods and services tax/harmonized sales tax (GST/HST);
• payroll;
• import/export; or
• corporation income tax.

For both individuals and businesses in Canada, you can appoint a representative who will deal with Revenue Canada on your behalf and many nonresidents choose to do this, rather than have to deal with the culture and regulations of a foreign country.

All nonresident matters in Canada are dealt with in Ottawa. You can reach the International Tax and Non-resident Section by calling toll-free 1-800-959-8281 (individuals) or 1-800-959-5525 (businesses) and all nonresident filings go to International Tax Services, Revenue Canada, Post Office Box 9769, Station T, Ottawa ON  K1G 3Y4 CANADA.

Dealing with taxation is difficult enough in your own country, but performers should realize that keeping tax filings up to date in a foreign country just makes good business sense. Get your paperwork in order early and remember that the deadline for nonresident filings in both the US and Canada is June 15.

I welcome your questions and concerns. Please write to me at: robert@bairdartists.com. While I cannot answer every question I receive in this column, I will feature as many as I can and I promise to answer each and every e-mail I receive.

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