It's Your Money
Mr. David Ingram;
Thank you very much for choosing our question and your very explicit reply.
We had sent in a W- 7 form twice, once making a guess as to how to complete
it, once with the advice of a US tax accountant over a very short
phone-call, and finally in the IRS office in Tucson. None of the advice we
got ever mentioned that one cannot get a ITIN # until one submits an annual
tax return. The agent at the IRS office knew no more than we did and we
all were reading the instructions as if for the first time. We are waiting
for an IRS response from this third try.
We are extremely unimpressed and frustrated. . The title company keep
telling us that their policy is not to release any money or close the deal
until the seller has an ITIN. However I forwarded your reply (with
disclaimer) to them and that has got them moving.
We would like some help completing our US tax return. Am I correct to
assume that all the non-resident forms you mentioned are to accompany the
annual tax return? That would mean that we do all this in 2005. We are
now in Green Valley AZ, close to Tucson, and will be here for the winter.
How shall we communicate - by e-mail?
Yours truly,
Wendy Colpitts
===============================================
david ingram replies:
The rules for getting an ITIN were changed on Dec 17, 2003 - the new form
and the rules are quite clear at: http://www.irs.gov/pub/irs-fill/fw7.pdf
The first paragraphs on page 2 (page one of the instructions) clearly tells
you to attach the W7 forms to the completed tax returns. It is amazing that
you could go to the IRS office and use an accountant and not get that simple
advice. However, you are not alone.
When the US non-resident returns are prepared (we can do them about Feb 15,
2005) you take the returns AND your completed W7 forms to the Social
Security Office in Tucson. There will be one with the IRS office.
The Social Security Office will verify who you are and make their own
certified copies of your Canadian Passports, driver's licences, birth
certificates, etc. They will also take the tax return from you to send in.
(Now, I candidly admit that they could change this method before then.)\r
Make sure that the Escrow Agent breaks down the sale into TWO 8288 forms,
one for each spouse showing 1/2 the sale and 1/2 the tax deducted. If the
Escrow agent is still having trouble, have them phone me at (604) 980-0321
between 10 AM and 10 PM seven days a week. I do NOT have an answering
service or machine. It is impossible for me to return messages. I leave it
up to you to call back. I am always busy from 6 PM to 10 PM on Tuesday
Evening (taking a UBC immigration course) and from 7 to 10 PM on Thursday
when I teach/give a seminar. I take the kids to a movie one night a week but
it varies and is usually for 7 to 10 PM.
You can deal with us easily by sending your 8288 forms (the one that shows
the sale and the tax withheld in your name (with no number), the original
statement of adjustments for the purchase, the original Statement of
adjustments for the sale, and a list of any capital items that you added to
the property (no Repairs and maintenance).
Additions would or could be:
* connection to a sewer system
* installation of a culvert
* building or creating a driveway
* paving an existing gravel driveway
* installing a porch
* building a canopy or extra roof over a mobile unit
* installing air conditioning
* erecting a television aerial you are leaving behind
* Special assessments by a municipality
* furniture you are leaving behind with a unit you sell
* adding a sump pump
* building a fence
* building a rec room or Lanai
* adding a garden shed, garage or carport
* putting in a heat pump
* Upgrading an electrical system
* installing built in appliances you are leaving behind
* building a brick outdoor barbecue
* building a patio for the barbecue
* installing a swimming pool
* anything else that is an "addition" and not a repair of an existing item -
A problem arises when you improve an item while repairing. If, for
instance, the bathroom requires $200 worth of plumbing repairs and you
decide to remodel and change all the fixtures and spend $10,000, the
addition would be the difference between $10,000 and the $200 repair and you
would add $9,800 as an addition.
You can use snail mail, fax, courier and email. Please do NOT email 50
pages of scanned documents. It takes too long to open, change sizes, etc.
One or two pages are okay but more than three is out.
Remember that this sale also has to be integrated with your Canadian
returns. We can do the US 1040NR, the Arizona 140NR, the Canadian T1
returns and Quebec if you are from Quebec.
Most of the tax (if any) left or paid to the USA will be a dollar for dollar
credit on the Canadian returns.
-----------------------------
The original question and answer follows
----------------------------
QUESTION:
1. My husband and I have sold a property in AZ but cannot close the deal
until we get an ITIN. We get conflicting advice as to how to complete the
form, even from IRS agents and have been rejected twice. What options do we
tick off and what accompanying documents are actually required?
2. We know we will have to complete a few other US tax forms this year and
would like to know an tax accountant in TUCSON who knows Canadian needs (not
Mexican). Can you recommend anyone?
3. The requirement to be less than 184 days in the USA in a The US calendar
year states that 'days in transit' are not included. Does apply to driving
through the country to reach one's destination (US home)? We are 3 days
over since we had to come early to try to resolve this W-7 requirement;
should we be diligent about leaving the country before Dec. 31st this year?
=============================
david ingram replies:
Congratulations, this is the only question I picked out of 37 to answer
today.
1. There is no reason that you cannot close the deal without an ITIN. On
Dec 17, 2003 the rules were changed and it became impossible to get an ITIN
until you filed the tax return. I have at least a dozen returns right now
where the properties have been sold without an ITIN. The Escrow agent sends
the money off on form 8288 without a number.
2. Each of the owners needs to complete a federal form 1040NR and an Arizona
140NR. The 1040NR requires pages 1, 2, 5 and a Schedule E and the completion
of AMT (alternative Minimum Tax) Form 6251. Note that on form 6251, you
have to write RPI beside line 30 and change the amounts according to the
instructions. None of the computerized programs I have bought will do the
calculation correctly for a non-resident. I do not know of anyone in Tucson
who does it. We would be happy to assist by email, snail mail, fax or
courier.
3. The US has the right to tax you on your world income if you are in the
USA for more than 183 days in any calendar year. You do NOT want to be
there for more than 183 days. Transit days refer to in transit from country
to country and does not apply to going into the US with a US destination.
(i.e. You are driving from Winnipeg to Mexico City - the days in transit
"through" the country do not count.)
So the answer is that you:
A. Sell the property and the Escrow Agent sends 10% to the IRS using From
8288. There should be one 8288 for you and one for your husband showing
half of the sale and half of the tax withheld.
B. You will do the tax returns and submit the W7 forms with "US" certified
copies o f the required documents with the return.
I am not sure where you live from your email address (sometimes I can make a
pretty accurate guess). If you are anywhere near the border, the easiest
method of dealing with this is to drive the US tax return to the
Social Security Office (i.e. in the 100 block of Magnolia in Bellingham)
They take your application along with the tax return and send the return
along with a certified W7 Application. Much simpler if you can find the
time.
IF YOU NEED HELP WITH THE RETURNS, ETC. YOU NOW KNOW WHERE WE ARE.
AND, if you wanted a free couple of minutes phone call, you can call as
follows:
==================
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram will be hosting an INFOMERCIAL but LIVE talk
show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
Local calls are taken at (604) 280-0600 and Long Distance calls are taken at
1( 866) 778-0600
I do not know how far the LD line reaches.
=========================================
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