Possible to reclaim unfair withholding tax?

[xuedalong]

I'm a UK citizen tax resident in Singapore. I'm not a US passport holder nor have I ever lived or worked in the US.

I work for a US public company in Singapore. Part of my total compensation is company stock. When we were acquired by another US public company in November 2023, some portion of my stock holdings were converted to cash, which the broker decided to disburse as a special dividend. This meant that I incurred a 30% withholding tax on the cash portion of that income – income for which I pay income tax in Singapore. More than 50% of the company employees are non-US tax residents so this impacts a lot of us.

What I would like to know is:

1) Is it even possible to reclaim this withholding tax? My understanding is that we would need to register an ITIN (W-7 form) and then file a tax return (1040NR form) form and then file for a refund (?).

2) Is this something Turbotax can do for us? Or is there an easy way to get help filing US tax forms (filing tax is not something most of us have ever had to do before, especially nothing as complex as US tax forms).

Thanks

[JulieS]

Yes, you are correct that you would need to file for an individual taxpayer identification number (ITN) by filing Form W-7, and file a 1040-NR to get a refund of the taxes withheld. 

Whether you would get all of the withholding refunded depends on the total amount of US income.

TurboTax doesn't handle Form 1040-NR, but you can use Sprintax. Follow this link for more about that. 

[xuedalong]

Thank you!

Total amount of US income would be $0 unless this cash conversion from my former company's stock counts? In what ways could the refund be dependent on total US income?

[SusanY1]

The "special dividend" would be the US income amount - that is the amount upon which the withholding was based.  The 30% withheld is typically the tax due on dividends unless you are a tax resident of a country with which the US has a treaty to tax the income at a lower amount.  The US doesn't have such an agreement with Singapore. 

Individuals filing form 1040NR are allowed to take a credit for taxes paid to another country, however.  The only real way to determine if there is a refund is to prepare the return as if you are going to file. 

Note that you need to prepare the return fully and submit it, along with the Form W7 and supporting documents to apply for the ITIN.  You don't get the ITIN first, but at the same time as filing your first tax return.