Do you have a link to the Fidelity study?
I'm not finding the direct one immediately (possibly because it's Fidelity's proprietary research), but it looks like
Investopedia picked up similar information in their ranking. Investopedia also ranks gold at the bottom of their list of inflation fighting investments.
A 3121(l) agreement was entered into for the Singapore subsidiary that employs me, so coverage is legally unavoidable unless I renounce or find another employer.
Yes, and that's rather rare, but I recall you mentioned that.
I wonder how many other U.S. parent companies have unwittingly signed up their Singapore subsidiaries for this. I also wonder how many Singapore subsidiaries unknowingly or knowingly violate that agreement.
Good questions! I don't think a U.S. person can transfer much of this risk onto an employer, though. Ultimately it's the employee's responsibility to sort it out as a matter of personal tax compliance.
In my experience, the local HR department will have no clue (and even if they do, they will play dumb and hope you don’t pursue it). The only way to be sure is to send an enquiry up to the head office to confirm it.
It's rather important to resolve, of course, if only because the employer's share of the U.S. payroll tax is rather valuable to collect. This is about your future retirement benefits if nothing else, after all.
There's an interesting "trick" that some people can pull off in order to maintain SSDI coverage: arrange to earn some U.S. payroll taxable income. One way is to take a part-time temporary job in the United States, to take a "working vacation." If the income is high enough, then you can log the minimum 2 "quarter credits" (Quarters of Coverage) to keep SSDI coverage going for another year. (The SSDI contribution recency requirement is a little complicated, but 2 quarter credits earned every year should be enough to keep SSDI alive.) Another possibility is to generate enough self-employment income to hit the 2 quarter credits level. In the year 2020 you need US$1,410 to earn one QC, so US$2,820 gets the job done in 2020.
Then there are possible legal and contractual complications with "moonlighting." In Singapore it's evidently legal for an employer to contract for exclusive employment, meaning the employer can legally prohibit "moonlighting" (taking a second job). Whether an employer makes that particular demand, precisely how broad the demand is, and whether you agree to it, are separate questions. In other countries -- Germany is one, I believe -- it's illegal for employers to prohibit all second jobs, although exceptions are possible, notably not working concurrently for a competitor.
I am a Singaporean staying in Singapore using Standard Chartered online trading account for US trading. I bought and hold a US stock call Allergan, and it just went into a merger with AbbVie in May2020. I was given cash and AbbVie stock as a result of the merger.
I received the full cash offer initially, but after a few days the brokerage did a reversal of the cash and credited me a much lower amount. Apparently it applied a 30% dividend tax on my cash offering. I understand that there is a 30% dividend tax on dividends for non-US citizen but this is not a dividend payout.
It might be a special dividend payout, though. Let me see if I can figure it out....Allergan and AbbVie....OK, unless the deal changed after its announcement, AbbVie paid US$120.30 per Allergan share in cash, and you should have received 0.8660 shares of AbbVie per share of Allergan. Typically in these corporate acquisitions your share count is rounded down to some whole share increment (nearest single share, or sometimes nearest 100 shares), so there might have been more total cash paid out to you for the fractional share(s).
Upon a
quick read of
IRS Publication 515, the primary publication brokers and other financial institutions use to figure out how to apply U.S. tax withholding, it appears your broker was/is correct in withholding 30% of the total cash distribution. Here's what the IRS says in Publication 515:
IRS said:
Amounts Subject to Chapter 3 Withholding
A payment is subject to Chapter 3 withholding if it is from sources within the United States, and it is fixed or determinable annual or periodical (FDAP) income. Generally, excluding gains but including certain gains from the disposal of timber, coal, and iron ore, or from the sale or exchange of patents, copyrights, and similar intangible property.
In addition, a payment is subject to Chapter 3 withholding if withholding is specifically required, even though it may not constitute U.S. source income or FDAP income. For example, corporate distributions may be subject to Chapter 3 withholding even though a part of the distribution may be a return of capital or capital gain that is not FDAP income.
The basic, unwritten but widely understood rule for brokers and financial institutions, frankly, is "When in doubt, withhold." They get in far bigger trouble if they fail to withhold.
OK, so the withholding occurred and is evidently correct (or at least not obviously incorrect), now what? Can you get the withheld money back? To answer that question we turn to
IRS Publication 519. It looks like this acquisition is a return of capital (with a capital gain presumably), and so it's not subject to U.S. tax when there's a nonresident alien who held the stock and when the income is "not effectively connected" to the U.S., which I also assume to be the case. These Allergan shares weren't part of a U.S. business, for example.
So, if I'm correct in all the above, you can get the money back by filing IRS Form 1040NR (a nonresident alien tax return) for tax year 2020. I believe you cannot file this form until February 15, 2021, at the earliest -- something like that anyway. (The 2020 edition of that form won't even be available until sometime in January, 2021.) Also, this particular sum won't earn any interest in the meantime, I'm afraid. You'll just have to chalk this all up to experience.
Let's assume for sake of argument the broker made a mistake and withheld too much. I don't think so, but let's assume that. To my knowledge the IRS doesn't allow the broker to reverse this error. You have to resolve all such errors with the IRS directly, as far as I know. I suppose you could negotiate for free trades or something like that as "good will" compensation if you find some good evidence the broker screwed up.
In order to file IRS Form 1040NR you'll need a U.S. Social Security Number (SSN) or ITIN. If you were ever given a SSN in your life -- maybe you studied at a U.S. university, for example -- then it's yours for life. So you'd use your SSN. (If you forgot your SSN then it's possible to recover it, with some work. Probably the easiest way is to apply for a replacement SSN card. Then please don't lose that card, and keep your number safe and in your personal records otherwise. U.S. SSNs are quite valuable, actually.) If not, then you need a U.S. Individual Taxpayer Identification Number (ITIN). And you'd get one of those by filing IRS Form W-7, which you can do at the same time you file IRS Form 1040NR. ITINs are slightly valuable (albeit perishable), so this part isn't necessarily a bad thing.
Then there's the interesting question of how to get paid your refund. The best way is to provide direct deposit information to the IRS, i.e. the "ACH" routing number and account number for a U.S. bank or U.S. credit union account. If you have a U.S. bank or U.S. credit union account already, great. If you don't, then you could look into getting one. Failing that, the IRS will send you a paper U.S. dollar check. And you could deposit a paper U.S. check in a bank in Singapore, but there will be a pretty hefty fee to do that.
Finally, as a reminder, your (now former) shares in Allergan, and your shares in AbbVie, are U.S. estate taxable assets. The dividends AbbVie pays are subject to 30% withholding tax (which isn't recoverable). And any future mergers/corporate actions involving special dividends or return of capital, similar to this one, are most likely subject to 30% withholding tax again (probably recoverable via Form 1040NR if a capital return). Part of being an investor is understanding the full range of possible outcomes, including tax-related ones. You've learned something! You might decide to roll this experience back into your investment and speculative (this was speculation, it's fair to say) decisions.
I think this 1042S form is for declaring your income, and will receive it in January. In addition, I never receive such form before, even for my typical dividends. Hence I have doubts if i will receive the form next year.
