IRA holdings in oil trusts that have forein tax withhold
Is there a way to recoup the tax withholding in forein dividend payers in tax deferred accounts. In a taxable account you just declare the withholding and get a offsetting credit on a yearly basis. What happens in a IRA?
Permalink Submitted by Alan Spross on Fri, 2008-07-25 20:26
The only way to recover the foreign tax withholding is by applying for a direct refund from the foreign country in those cases where it is allowed under US Tax treaties. For example, these taxes should not be withheld from IRA assets by a Canadian company, but if they are there is a form to be filled out for a direct refund. There is no credit that can be claimed on the US tax return. Generally speaking, the process of a direct refund can be time consuming and may not be worth it for nominal amounts.
Normally, the forfeited amount of foreign tax is not enough such that advisors recommend keeping all foreign allocations in taxable accounts. Of course, if you have a wide variety with different rates of foreign taxes, it would be best to hold the ones with the highest rates in your taxable accounts.