If you filed a Form 1040NR, U.S. Nonresident Alien Income Tax Return, in 2015 claiming a refund from an overwithholding of tax on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, and have not received the refund yet, you are not alone. The delay is due to a current policy adopted by the Service while it conducts an examination of withholding agents and intermediaries on payments to nonresident alien individuals, foreign entities and foreign governments. No refunds are released within the first 6 months from the later of either the original due date of Form 1040NR or the date when the return was actually filed. To put it into perspective, if you filed your 2014 1040NR by its statutory due date of June 15, 2015 with all the appropriate withholding attachments, you will only be able to collect a refund after December 15, 2015.
It is currently unknown whether the same compliance focus will be adopted by the Service in 2016. To avoid a potential and unnecessary delay in collection of an overwithheld tax we advise our clients and prospects to submit in advance accurately completed Forms W-8BEN, Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding, W-8BEN-E or any similar W-8 category forms to enable a withholding agent or intermediary to hold back only the required rate of tax on U.S. source income.