Wednesday, December 29, 2010
Individuals who are nonresident aliens of the United States, but who receive U.S. source income from a U.S. trade or business including wages, commissions, interest, dividends, pensions, gambling winnings, etc., report and pay taxes on that income on U.S. Nonresident Alien Income Tax Returns (Form 1040NR). This income is also subject to income tax withholding. Nonresident aliens also file Form 1040NR to request refunds of amounts over withheld. There were approximately 598,000 Tax Year 2008 Forms 1040NR processed in 2009. Total tax withheld on these returns amounted to more than $2.4 billion and refunds amounted to more than $712 million. ... [A] judgmental sample of Tax Year 2007 and 2008 returns revealed significant control weaknesses in the processing of refunds claimed on Forms 1040NR. ... [A]dditional steps are necessary to ensure that questionable refunds claimed on Forms 1040NR are identified and stopped prior to issuance.