Canadian withholding tax

T

testitit

Registered Users (C)
Sorry for posting an unrelated issue here, but I think a lot of TN holders might know the answer.

I am a Canadian citizen working in US. Five years ago I opened an account in Royal Bank Canada Action Direct Group and put $5000 in there. I then moved to US. Recently I sold a stock and closed the account. Astoundingly, Royal Bank only sent me a check of $3500 without any explanation. I made an enquiry and a man told me I am undocumented and subjected withholding tax. For God’s sake, they withhold 30% of my PRINCIPLE not earning (I already lost quite a lot). Has anyone ever been in a similar situation? How can I recover some of my lost?

Stephen :mad::mad::mad::mad::mad::mad::mad::mad:
 
We had the same problem. We own a house in Canada that we rent out. We moved here in Dec/04, and didn't use an accountant since we thought the tax return would be straight forward since my husband didn't have any US income in 2004. Anyway, there was paperwork (form T1161) we didn't know we had to file, and it was $25 per DAY it was late, so we each ended up having to pay $2500 in late fees (they cap it at $2500. How nice of them.) They didn't assess the fee until more than 2 years after, but still charged us interest. Plus they were sending it to our old address even though they had our new one.

I wrote to Revenue Canada and sent in an appeal (here's the form: http://www.cra-arc.gc.ca/E/pbg/tf/t400a/README.html). Last I heard, they forgave it since we did eventually send in the required forms along with some other stuff (it is called voluntary disclosure). I haven't seen my tax refunds come back yet though, so I'm not going to say it is resolved until the cash is in the bank.
 
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Stephen, was the tax withheld for Cdn tax purposes or US tax purposes?

It sounds more like US tax.

Kim's situation is not the same as yours, as hers was a case of failing to comply with departure tax rules.

Your may simply be failure to provide a specific form to the bank.
 
Thanks both for the reply! I am sure I am not the only one. A warning to everyone: be very careful when you deal with Royal Bank. It likes a day-light robery.

Nelsona, you are right. I called them and a lady told me that I was short of some kind of form (w-9?). Anyway, can I get some back since it is my PRINCIPLE not earning? I feel like I put a CD somewhere, when I close account they charge me 30% of the total amount, not just the interest.
 
The way to get it back is on your US tax return. You include the tax like you do any other withheld tax, and report the gain you actually made.

The tax will be refunded.

Once tax is withheld, correctly or not, the only way to get it back is from the Govt, thru a tax return.

This is why it is inadvisable to have investment account in canada when living in US.
 
Thanks, Nelsona! I wish I knew that earlier. Unfortunately, the gain is only $20 and the withhold is about $1360. Do you think I can claim $1360 as foreign tax credit from a $20 gain when I do my US tax return? Also, does the money goes to IRS or Revenue Canada? I am a little confused.

Thanks,
 
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Your broker can tell you for sure but I'm pretty sure the money is going to the IRS (that is why the need for w-9). broker will issue you a receipt.

If it goes to IRS:
it is not foreign tax, it is US tax withheld at source. You will add it to any other US tax witheld at source, like off your paycheck, when determining what you owe or get back from IRS. The gain will gop on your return as well.

If it goes to CRA:

you'll need to claim it back on a Cdn tax return. Nothing will appear on your US tax return, since it wasn't a true tax in the first place. Gains in canada are not taxable by canada for US residents.
 
Just call RBC Action Direct, they said they will send me a TN1099 so I can included in my US tax return. Hopefull I can get some back. I am pretty skeptical about that. Thanks for the explaination.
 
Why would you not get it back? When you file your 2007 US return (assuming you sold in 2007) then you are simply adding to what you already paid IRS. Since you say it is only a gain of $20, there will be little extra US tax to pay. If your other income was being withheld correctly, then it will all come back.

Now, if you sold in 2008, then you will have to wait until you file your 2008 tax return, a year from now.

See how a missing form will give you trouble?
 
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