PCA Cayman Raffle – Caution

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    Anonymous

    I was curious about Canadian eligibility for the PCA car raffle, so asked PCA HQ. Just received this note from Vu that is worth considering before you buy a ticket.

    Hi Emily,

    Winner would be liable for US taxes as a non-resident alien. They would file a non-resident return (1040-NR). Information from the IRS website is below.

    IRS website (irs.gov)
    A nonresident alien’s income that is subject to U.S. income tax must generally be divided into two categories:
    *Income that is Effectively Connected with a trade or business in the United States *U.S. source income that is Fixed, Determinable, Annual, or Periodical (FDAP)

    Effectively Connected Income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. FDAP income generally consists of passive investment income; however, in theory, it could consist of almost any sort of income. FDAP income is taxed at a flat 30 percent (or lower treaty rate) and no deductions are allowed against such income. Effectively Connected Income should be reported on page one of Form 1040NR. FDAP income should be reported on page four of Form 1040NR.

    Which Form to File

    Nonresident aliens who are required to file an income tax return must use:
    *Form 1040NR (PDF) or,
    *Form 1040NR-EZ (PDF) if qualified. Refer to the Instructions for Form 1040NR-EZ to determine if you qualify.

    Good luck!

    Vu

    Vu T.H. Nguyen
    Executive Director
    Porsche Club of America

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