SSA 1042S / 1040NR

[Kea]

I think I messed this one up!

Client came in last year with her brother's Social Security benefits statement. She has POA for him. He lives in the Philippines & received Social Security. Since that is his only income, I filed to get him a refund of all withholding. It was already April & I did not notice that the form was an SSA 1042S and not a SSA 1099. I did not realize it should have gone on a 1040NR. I've never prepared a 1040NR, but looking (briefly) at the instructions, it appears that the regular social security rules do not apply. If that is his only income, he should be taxed at 30% on 85% of that income.

Or, are there some exemptions or other modifications I can / should make? Since this is what was withheld, does a return need to be filed?

Brother had gone to someone in the Philippines to get file prior years to get refunds. I guess that's why I didn't question my assumption at the time. (And, it was April!)

Thanks!

[Pacun]

I think a US citizen always files 1040. I never heard about 1040NR for US citizen. ALSO, the philipines has a tax treaty with the US. If you have to file 1040NR (which I think you don't), you will have to consider the tax treaty.

I was trying to find out when form 1040NR was invented just to show you that this form was later adapted because of globalization but I couldn't find that answer.

This information from the IRS might help you.

Question: I am a U.S. citizen living and working overseas. Can I have a tax credit on my U.S. taxes for the taxes I pay to the foreign country?

Answer:

You can choose each tax year to take the amount of a qualified tax paid or accrued during the year as a foreign tax credit or as an itemized deduction.

The foreign tax credit is intended to relieve U.S. taxpayers of the double tax burden when their foreign source income is taxed by both the United States and the foreign country from which the income is derived.

Only income taxes paid or accrued to a foreign country or a U.S. possession qualify for the foreign tax credit.

You can choose to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction.

To choose the foreign tax credit you must generally complete Form 1116 (PDF), Foreign Tax Credit, and attach it to your Form 1040 (PDF).

You may claim credit without attaching Form 1116 if all of your foreign source income is interest or dividends reported to you on qualified payee statements, the total amount of qualifying foreign taxes you paid or accrued is not more than $300 ($600 in the case of a joint return) and is also paid to countries recognized by the United States.

To choose the deduction, you must itemize deductions on Form 1040 Schedule A (PDF).There are numerous items that can be claimed only as a deduction.

You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. There is no double taxation in this situation because the income is not subject to U.S. tax.

******************

Social security benefits paid to residents. If you are a lawful permanent resident (green card holder) and a flat 30% tax was withheld in error on your social security benefits, the tax is refundable by the Social Security Administration (SSA) or the IRS. The SSA will refund the tax withheld if the refund can be processed during the same calendar year in which the tax was withheld. If the SSA cannot refund the tax withheld, you must file a Form 1040 or 1040A with the Internal Revenue Service Center at the address listed under Where To File to determine if you are entitled to a refund. The following information must be submitted with your Form 1040 or Form 1040A.

A copy of Form SSA-1042S, Social Security Benefit Statement.

A copy of your “green card.”

A signed declaration that includes the following statements.

“I am a U.S. lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. I am filing a U.S. income tax return for the taxable year as a resident alien reporting all of my worldwide income. I have not claimed benefits for the taxable year under an income tax treaty as a nonresident alien.”

[Kea]

Thanks Pacun. I may not be in trouble after all. But I guess I'd better ask a few more questions. (I know I asked some of them last year, but, ... )

[Kea]

Brother is a disabled veteran receiving Social Security & VA benefits. He lives in the Philippines & has a Green Card. He is not a US Citizen.

If I am reading the instructions correctly, he is considered a US Resident because he has a Green Card, right?

So, I am OK filing the 1040 (not NR) and submitting the documents that Pacun listed above?

I'm just getting a little confused by the terminology -- just verifying that he can state: “I am a U.S. lawful permanent resident..." when he doesn't live in the US.

Thanks again.

[Kea]

Does this matter--

Client has green card and there is no expiration date on it. But just found out today that he hasn't been to the US since 1997. His sister said that after 2 years (1 year + 1 year extension) that he cannot come back to the US.

Does that mean he is no longer a US Resident?

If not a resident, then does a 1040NR need to be filed? Would there be any benefit?

Thanks

[Pacun]

Does this matter--

Client has green card and there is no expiration date on it. But just found out today that he hasn't been to the US since 1997. His sister said that after 2 years (1 year + 1 year extension) that he cannot come back to the US.

Does that mean he is no longer a US Resident?

If not a resident, then does a 1040NR need to be filed? Would there be any benefit?

Thanks

He is not a green card holder anymore. Yes, there are many benefits of being a green card holder but he is not.

[Kea]

Thanks Pacun.

So, I guess I go back to part of my original post. I know very little about the 1040NR. But it appeared that there were no deductions in this case. His only (worldwide) income is the 1042S and a non-taxable disability check. If he files a 1040NR & all income is taxed at 30% - then there is no refund or balance due since that is what was withheld. Does it need to be filed?

He moved back to the Philippines decades ago & did not file taxes. Then he found someone there that would file them if he could keep 1/2. That was for his 2008 return. He did get the refund & the preparer did keep 1/2. His sister told him he was getting ripped off. I filed it last year (not knowing green card was no longer valid). He never got the refund but the only communication from IRS was that there was no info for his wife. She does not have a SSN or ITIN (never been to US). They have been separated for years, but there is no divorce in the Philippines. He filled out the paperwork they sent him and indicated that she does not have SSN or ITIN & he never heard back.

So do I need to file a 2010 1040NR? Or, is it just a moot point now?

Thanks so much.

[Pacun]

Thanks Pacun.

So, I guess I go back to part of my original post. I know very little about the 1040NR. But it appeared that there were no deductions in this case. His only (worldwide) income is the 1042S and a non-taxable disability check. If he files a 1040NR & all income is taxed at 30% - then there is no refund or balance due since that is what was withheld. Does it need to be filed?

He moved back to the Philippines decades ago & did not file taxes. Then he found someone there that would file them if he could keep 1/2. That was for his 2008 return. He did get the refund & the preparer did keep 1/2. His sister told him he was getting ripped off. I filed it last year (not knowing green card was no longer valid). He never got the refund but the only communication from IRS was that there was no info for his wife. She does not have a SSN or ITIN (never been to US). They have been separated for years, but there is no divorce in the Philippines. He filled out the paperwork they sent him and indicated that she does not have SSN or ITIN & he never heard back.

So do I need to file a 2010 1040NR? Or, is it just a moot point now?

Thanks so much.

File it. The IRS is expecting that return. If you feel sorry for him, charge him half of his refund. The IRS will be OK with it in this case.

[Kea]

I don't particularly feel sorry for him (at least in terms of filing a return - he is a paraplegic - but that's different).

I just don't know much (if anything) about the 1040NR.

Thanks for your help.

[Pacun]

How much did you know when you prepared your first 1040? How about when you prepared your first Schedule C, D, E? Don't worry, just take your time.

He has a personal exemption and he paid you to prepare his taxes last year, which is an itemized deduction item. He should get a refund.

[Kea]

On my first glance at the 1040NR I didn't think there were any deductions. So I was under the impression that the withholding was the same as the tax. I'm glad I might be wrong. I wouldn't think this should be too difficult since the only income is the 1042S.

I'm not stressing too much on this one (yet). Just asking lots of questions to make sure I do it right. But, that's how we learn! I'm just so grateful for this forum so I can make sure I learn new (to me) forms correctly.