Tax withheld by USA working in UK (Form 1042-S and Form 1099)

Question

I live/work in the UK but own some US shares held by US brokers that I've earned working for a USA company in UK. My broker sent me 1042-S and 1099 forms. Form 1099 reports $957 Federal Income Tax was withheld. Form 1042-S reports $246 as Tax withholding credit and mentions tax rate as 30%.

Why was I sent both 1042-S and 1099. Which amount is the right amount that has been withheld. Can I claim this in my UK returns that I file. If so, how? Is the tax rate 30% the correct tax rate? Will be glad if someone could guide me with the next steps?

Answer 1

The shares are "imputed income" / payment in kind. You worked in the UK, but are you a "US Person"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers.

Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ?

If you sell the shares, or are paid dividends, then there will be tax withheld.

Answer 2

Why was I sent both 1042-S and 1099. Which amount is the right amount that has been withheld.

Generally, each tax form you get will be about a separate income; for instance, you might get a 1099-DIV for dividends you earned from an investment and then a 1099-B for the profit or loss on selling that investment, in which case you'd report them both to the IRS. In this case, you've also had money withheld as a non-resident alien, which is why you've been issued a 1042-S. So you need to report both amounts to the IRS.