US Withhold Tax for Non-Resident Aliens

[Masood F]

Hi Mark,

I am a Canadian with holdings of dividend-paying US stocks, and use FM Personal ver 12.1. At present when I record a dividend payment in FM, I use the net amount of divvy paid. However, is there a way to record the 15% Withholding Tax that gets deducted at source on each dividend payment, such that the stock's performance is not affected?

My apologies if this topic has been addressed before, however I was not able to find an answer in the message boards.

Many thanks.

[Mark]

Hi Masood F,

If you record this withholding tax in the investment itself, that would negatively affect the performance of that investment. You would record this as a negative distribution.

You could record this as a sell transaction out of cash, which would not affect the original investment's performance. You might want to put some specific text in the memo field, so you could easily run an Investment Transaction report with a memo filter so you can easily find all these transactions.

[rdg]

The easiest way is to show the Gross Amount as the Dividend Amount.
Then do another "Distribution" classed as Foreign Tax with the amount being the Withholding Tax.

This way your numbers will match your 1099 Div

[twj332]

I post my gross USD divided as a pos. amount (Distribution) and then post a neg distribution amount for the foreign tax withheld => issue I have is that ver 13.7 of FM now picks up the neg. amounts in the Capital Gains Report.

? Should this amount be recorded as a capital gain?

Please advise
Terry

[Mark]

Hi Terry,

No, a Foreign Tax type of distribution should have no impact in your Capital Gains report. Are you recording it as a distribution of type Foreign Tax, and not maybe a sell transaction?

[twj332]

Yes I am recording it as a distribution type: Foreign Tax with a negative amount. Shows up in red.
In fact I was given instruction on how to do this in this forum. With my prior version FM 12.9 the foreign tax amount did not show up in the capital gains report.

Not sure what the issue is but would like some direction on this.
thanks
Terry

[Mark]

Hi Terry,

Maybe you can send some screen shots, or email me the investment file, along with instructions on how to reproduce the report issue...

[twj332]

I have sent you the input screen shots in one document: input screen, data register: foreign tax, and capital gains report.
Note I did not ever have this issue with FM 12.9 just discover if after I upgraded to 13.7

Please let me know what you discover, I will followup in morning, let me know if you need anything else.
thanks
Terry

[Mark]

Hi Terry,

The reason is you are recording them as negative "Reinvested" distributions. This means you are selling some shares, to pay for a distribution. This selling of shares is showing up in the Capital Gains report.

[twj332]

Hi Mark

Thanks for speedy reply. I not sure what I agree with your explanation - reinvested distributions result in a purchase - this I understand, the foreign withholding tax is held-back and as such is neither a purchase or sale.

I need have method to account for the amount of the foreign tax. Is there another method of accounting for the shares or a change that can be made to FM so the foreign tax on dividends does not show up in the capital gains report?

Terry

[twj332]

Just a suggestion re: Capital Gains Report

maybe include: distributions: foreign tax in the Excluded Investment types? so that the report does not pickup the foreign tax withheld as a sale amount. Or if that is not possible Mark - please provide instructions on a work around for this problem.
Thanks

Terry

[Mark]

Hi Terry,

I think you just want to record them as distributed, and not reinvested, distributions. For example, let's say your stock paid $100 total in a dividend, but $10 was withheld for foreign taxes, so you only received $90. You would record a positive $100 distributed dividend and a negative -$10 foreign tax distributed distribution. You want to leave the "Reinvested" box un-checked on both distributions, as there are no shares being purchased or redeemed with this money. Nothing will show up in the Capital Gains report under these conditions.

Anytime you leave the "Reinvested" box checked in the Distribution dialog, you're saying that money was used to purchase more shares, and you enter the number of shares re-purchased. Likewise, if you have a negative valued distribution that you mark as Reinvested, you are selling shares to pay for that distribution/fee. If you didn't have any shares involved, like with a stock dividend, then leave that Reinvested box un-checked, and you'll only enter a value amount (no shares).

[Masood F]

Hi Mark,

Let's say my stock paid $100 total in a dividend, and $10 was withheld for foreign taxes, so I only received $90. Let's say, further, that the $90 was reinvested in the same stock that paid the divvy (such as in a Dividend Reinvestment Plan).

How would I record this in Fund Manager 12.1 Personal Edition?

I know I can do a Distribution Transaction of $90 (the net amount) with the "Reinvested" box checked. However, is there a way to use the "Distribution Type: Foreign Tax" to record the $10 tax that I paid?

Thanks.

[Mark]

Hi Masood F,

I would suggest using 3 transactions:

$100 dividend distribution (not reinvested)
-$10 foreign tax distribution
$90 buy

[Masood F]

Thanks for your quick response.