1099-B - sale proceedings after leaving US

[mohakha3]

Hi, I am a non US citizen who left US for good in Sep first week.  Since this is an intra company transfer, I got to keep my RSUs. On Sep 10 my RSUs vested and I sold it on Sep 14.  Tax on vested RSU is already withheld correctly by the company. This vested RSU will not be shown on my W2 as I was no more with the US employer on Sep 10. Since the vesting and subsequent sale happened after I left US but before I could change my brokerage to international account, the brokerage included this RSU sale on form 1099-B. I will be taking credit for the tax withheld at the time of vesting from my current country, so I do not plan to file dual status return. Also, I'll be showing the capital gain in the current location. 

Do I need to report this capital gain on US tax return just because my broker included it in 1099-B?  Or for that sake any stock sold after we leave US but is shown on 1099-B incur tax on capital gains in the US for non-US citizens? 

Thanks!

[DianeW777]

Perhaps.  The following will provide specific details on who must file.  Generally, it is advisable to file to show that you do not have any tax liability depending on the amount of the vested RSUs.  However, if you find that your withholding would cover the tax then you may not be required to file according to the IRS information below. It will depend on your specific tax situation and whether you have other U.S. income.

A.  Who Must File as a Nonresident Alien

If you are any of the following, you must file a return:

1. A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during the year.
2. A nonresident alien individual who is not engaged in a trade or business in the United States and has U.S. income on which the tax liability was not satisfied by the withholding of tax at the source.
3. A representative or agent responsible for filing the return of an individual described in (1) or (2),
4. A fiduciary for a nonresident alien estate or trust, or
5. A resident or domestic fiduciary, or other person, charged with the care of the person or property of a nonresident individual may be required to file an income tax return for that individual and pay the tax (Refer to Treas. Reg. 1.6012-3(b)).

B.  Which Income to Report

A nonresident alien's income that is subject to U.S. income tax must generally be divided into two categories:

• Income that is Effectively Connected with a trade or business in the United States
• U.S. source income that is Fixed, Determinable, Annual, or Periodical (FDAP) (This would apply to sales of stock)

[mohakha3]

Hi @DianeW777 , Thanks for your response. None of the NR clauses are applicable to me. My company is already withholding taxes when RSUs vest. eg: Out of 10 stocks, 4 go towards tax and I receive only 6. For rest of the financial year (Jan - Aug 2021), I am already filing 1040. Do you think it will be ok to show this September RSU sale proceedings on regular 1040 that I am filing?

Thanks!

[DianeW777 · Accepted solution]

Yes, since you are already filing you may want to show the sale and include the federal withholding based on the statement about income source (shown below). Use the link below and compare the facts to your specific situation for residency.  

• Residency Starting and Ending Dates

I lean towards the statement above which indicates any U.S. source income is required to be reported.

• U.S. source income that is Fixed, Determinable, Annual, or Periodical (FDAP) (This would apply to sales of stock)

[mohakha3]

Hi @DianeW777 ! Thanks for your response.