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Check List for Non Resident Owners of US Rental / Investment Property

Check List for Non Resident Owners of US Rental / Investment Property

It’s never to early to get ready for your next year’s tax return filing…

Yes, we know it’s early to start thinking about filing your 2019 tax return but making a list and checking it twice now will ensure you stay ahead of the filing deadlines in 2020…

  • Who needs to file taxes?
  • What information do you need for your tax return?
  • What tax forms do you need for your tax return?
  • What tax forms do you need to submit with your tax return?
  • How do you choose the right tax filing status?
  • What if I own my property via a Trust or Limited Liability Corporate (LLC)?
  • What if you can’t meet the tax filing deadline”?
  • How can you claim a tax refund?
  • How do you track your refund?
  • How do you pay taxes if you owe the IRS money?

Who needs to file taxes?
As nonresident owners of US rental property, each owner is required to file a US Income Tax Return UNLESS you have had withholding applied (30% of gross income) by your management company or booking agent. For most owners, there is little or no tax liability when filing a tax return as you are able to claim the expenses such as management company fees, mortgage interest, utilities etc. and depreciation of the property.

What information do you need for your tax return?
If you have not already downloaded and completed your tax questionnaire, you can start now – 2019 Tax Questionnaire. Not spreadsheet savvy? HBI clients – do not despair; simply complete page one and the top of page two of the questionnaire and send to us along with copies of your management company statements and receipts for any major additions, improvements & upgrades.

What tax forms do you need for your tax return?
If you receive investment income or rental income via your management company or booking agent, you will receive Form 1042-S stating the amount of income received on your behalf and the amount of withholding (if any) applied to the income. If withholding has been applied, you may receive some or all of it back as a refund once the IRS has processed the tax return.

In addition, your US lender will provide you with Form 1098 stating the amount of mortgage interest paid during the year.

What if I own my property via a Trust or Limited Liability Corporate (LLC)?
If you previously held your interest in US property as individuals but transferred to a Trust or LLC during the tax year it is extremely important that you report this change to your tax preparer. If you hold an interest in US property via an LLC you are required to register and file an Annual Report to the Department of State where your property is located. You are also required to have a registered agent within the state where your property is located.

Where reportable transactions between the Trust/LLC and owner occurred during the tax year, IRS regulations require the filing of Form 5472. A penalty of $25,000 is assessed on failure to timely file Form 5472.

How do you choose the right tax filing status?
Nonresident owners cannot file a “joint” tax return so, even if you are married and both of you own the property, you are each required to file a tax return using the filing status – married filing separately.

What if you can’t meet the tax filing deadline”?
Don’t worry! If you cannot meet the June 15 filing deadline, an extension can be filed to extend the deadline to October 15. The extension must be filed on or before June 15 but it only extends the time to file – not the time for you to pay any tax due. Pay your estimated tax by June 15 to avoid penalties and late fees.

Make sure to file even if you cannot afford to pay your taxes – the failure-to-file-penalty is substantially greater than the penalty for failing to pay.

How can you claim a tax refund?
If you have overpaid your taxes during the year because withholding was applied to your rental income or FIRPTA withholding applied to the sale of your US property, you can claim your refund simply by e-filing or mailing your tax returns. The IRS will send your refund via mail or you can submit your US bank information and request to have your refund distributed using direct deposit.

How can you track your refund?
After your tax return has been submitted, track its status on the IRS website. You will need to submit your Individual Taxpayer Identification Number (ITIN), choose your filing status, and input the refund amount to track when it will arrive.

How do you pay taxes if you owe the IRS money?
Taxpayers who owe money to the IRS can pay using their bank account without paying a fee. The IRS payment website allows you to use direct pay at no cost by submitting your bank information. You may also pay with a credit card using a third-party payment processor, but there is a fee for doing so.  You can pay your taxes by sending a check or money order to the IRS.

Now, all that’s needed is for you to…

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We're a well-established tax and accounting, mortgage, and financial advisory firm operating since 2000. We serve our clients from three Central Florida locations. Our expertise extends to both domestic and international concerns when it comes to investing and doing business in Florida and beyond.

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Harding Bell International, Inc.
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