People who file Form 1040NR (as nonresidents of the United States) will sometimes receive a tax refund. Sometimes it is large, sometimes it is small.
The IRS, by default, issues a paper check for refunds.
It will shock you to discover that sometimes paper checks take a long time to reach their overseas destination. Sometimes the paper checks never arrive. Or sometimes it is a big hassle to deposit the U.S. dollar denominated check into a bank account overseas. Or it costs a significant amount in bank fees to get this done.
In short, paper checks are an abomination.
It is possible to have refunds deposited directly to your bank account. You simply fill in the routing number and account number for you bank account (see Line 73b and Line 73d of Form 1040NR), and tell the government whether this is a checking account or savings account (see Line 73b of Form 1040NR).
What happens if you, a nonresident of the United States, do not have a bank account in the United States?
You’re out of luck. You must receive a paper check.
A tax practitioner may not deposit your refund check into his or her bank account. Circular 230, Section 10.31(a) (warning: PDF) tells us:
A practitioner may not endorse or otherwise negotiate any check (including directing or accepting payment by any means, electronic or otherwise, into an account owned or controlled by the practitioner or any firm or other entity with whom the practitioner is associated) issued to a client by the government in respect of a Federal tax liability.
This means that for a nonresident individual who is getting a U.S. income tax refund, the choices are:
Accept a paper check mailed to your address outside the United States, and deposit it to your bank account outside the United States.
Accept a paper check mailed to your tax practitioner at an address inside the United States, and then have the tax practitioner send the check to you so you can deposit the check to your non-U.S. bank account.
Accept a paper check mailed to someone else at an address inside the United States, then have that person send the check to you so you can deposit it to your non-U.S. bank account.
Accept a paper check mailed to someone other than your tax practitioner at an address inside the United States, then have that person deposit the check to his or her bank account (be sure the person is authorized to do this by giving them a proper power of attorney).
Come to the United States and open a bank account in your name and bask in the glory of having your tax refund directly deposited to a bank account that you control and enjoy.
Phil Hodgen
Philip D. W. Hodgen is the principal attorney of HodgenLaw PC, an international tax law firm based in Pasadena, California. He earned his undergraduate degree from Claremont McKenna College and his law degree from the School of Law at the University of California, Los Angeles. He then went on to earn a Master of Laws degree with a specialty in taxation from the University of San Diego School of Law. Admitted to the California bar in 1982, Phil spent nine years in law firms and with a large U.S. bank before starting his own firm in 1991.
Phil is a past chair of the International Tax Committee of the State Bar of California's Tax Section and was a member of the Executive Committee of the State Bar of California's Tax Section for 2004-2007. Phil frequently speaks on a variety of international tax, trust and estate topics to attorneys, accountants, and real estate professionals.
A reader of my November, 2008 article in California CPA Magazine (hi, David) called me and asked a question about the article. He wanted to clarify a generation-skipping transfer tax question. I didn’t have the space in the article to cover all of the nooks and crannies on the subject of estate taxation for cross-border…
Undeclared foreign bank accounts. It’s a common question. “I have this foreign bank account, but I haven’t been declaring it by filing Form TD F 90-22.1.? [PDF] What should I do?” The short answer is clean it up. All of it. First things first. Form TD F 90-22.1 is commonly known as an FBAR, for…
I got an inquiry today from my FIRPTA.com website that I figured would be worth answering here, because it is a topic of general application. The question is whether using a foreign corporation works to protect against U.S. estate tax. Foreign corporations to hold U.S. real estate Nonresident investors frequently hold U.S. real estate using…
It isn’t international tax (directly) but I’m solving this California corporate tax problem publicly so you don’t have to lose a few brain cells. If you form a corporation in California on December 17 or later you don’t have to file a California tax return for the rest of the year. This is if you…
To the people who attended my course today in San Jose: here is the private letter ruling I referred to. This document may not be used or cited as precedent. Section 6110(j)(3) of the Internal Revenue Code. Private Letter Ruling 200243031 PLR 200243031; 2002 PLR LEXIS 1086 July 25, 2002 SUBJECT MATTER: Section 672 —…
This is something that comes up again and again. Nonresident owns raw land (just dirt, nothing on it). There are some costs incurred each year — property taxes for sure, maybe mortgage interest, maybe a couple of other things. But property tax mostly. How can these costs get converted into a tax deduction? Answer: not…
Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.
