Non-resident alien - Taxes for sale of US shares before moving to US

[kiku_123]

I had moved from a foreign country to US in Nov, 2017. I didn't pass the substantial presence test. So, I would qualify for Non-Resident Alien for 2017 US tax purpose. I had some shares (obtained through my employer in ESPP, RSUs) invested in US stock market through a brokerage agency. My brokerage account was W8BEN certified until mid of Nov & got changed to W9 after I updated the brokerage account with my SSN after moving to US. I had sold some shared while I was in a foreign country & some after moving to US.

 

As I understand, Non-Resident aliens need to pay taxes only for the income earned after moving to US. But, my brokerage agency has listed all the income through my sale of shares before moving to US in 1099-B. They have also issued 1042-S for the dividends I had received before moving to US.

 

I had paid taxes for those shares before moving to US in my home country which has a DTAA agreement as well.

 

Now my biggest concern is whether am I supposed to pay taxes for the shares sold before moving to US even though my brokerage account was W8BEN certified because it is reported in my 1099-B? If not, do I have to ask my brokerage agency for an amended 1099-B or is it ok to just show the income after moving to US?

[DS30]

If the shares related to work done prior to moving to the US, then you will need to contact your broker and see why this information was reported no your 1099-B. You will need to explain your situation and see if they will send you a corrected 1099-B.

Otherwise, the information that you are reporting on your tax return (with the exclusion of the foreign sold shares) will not match what has been reported to the IRS.

[kiku_123]

My brokerage company told me that the shares sold before moving to US were shown as non-covered and the cost basis is marked as N/A. They are asking me to change the cost basis of those shares accordingly for returns. Is that legal?

[DS30]

If the shares show no cost basis, then don't include the shares on your return even if reported on a 1099-B. If the IRS contacts you at a future date, then just explain your situation - that these shares related to foreign sourced income when you were considered a nonresident and therefore were not reported on a US income tax return.

[kiku_123]

Thank you. What about dividends I had received for these shares before moving to US. They are reported in 1042-S. How should I report them in 1040NR?

Also should I have to specify my foreign income before moving to US somewhere & show as an exception in 1040NR?

[DS30]

You will need to include the dividends on 1040NR only if they related to your any US portion of your shares held. Any foreign sourced income does not need to be reported at all on your 1040NR. Only US sourced income.

[kiku_123]

25% tax has already been deducted on those dividends (of US shares before moving to US). Where should I enter this info?

[DS30]

Under the dividends section and include the amount of withholdings.