We are heading into the fourth quarter of the calendar year.

For all US business entities (of just about any kind) this means it is time again to prepare and file many annual burdensome reports of business activities occurring during this fiscal year with United States Internal Revenue Service.

Why is this? Under the current system of US taxation, just any income derived from whatever source (just about, including gambling and illegal drug transactions) is subject to filing and taxation.

Income is as officially stated in Internal Revenue Publications as "gross income consists of all income from all sources, such as compensation for services, business income, interest, rents, dividends, and gains from sale of property''.

Amazingly, the collection of taxes in the US is a voluntary one. The numbers of obedient taxpayers who duly report and pay taxes, if any, each year is an incredible 86 percent or so. Self-employed businesses are much worse with an abysmal record of around 35-40 percent.

As for those citizens living offshore, Internal Revenue Service tends to make the blanket assumption that they may not be adhering to the rules. As onerous and burdensome as they are, taxes are necessary to help finance the infrastructure of a modern society, at least, and until, someone can figure out a better! Whoever said (and it was probably Shakespeare 400 years ago) the worst things in life are death and taxes, probably suffered greatly under the taxation system in place at that time.

At the great risk of boring you all, I will repeat again, any assets, particularly securities, held in the US may subject to reporting, perhaps filing and taxation by the payer and the payee! Who is the payee? YOU! For those living offshore with investments in United States securities that are held in a United States financial institution, this means you! Notices are being sent now to every offshore account holder by every single financial institution for every single account you hold in the United States. If you have received these notices, take the time now to read the fine print.

In real terms, what does this mean to you? First, It means you cannot avoid taking care of this issue. Each account holder needs to fill out and sign a separate W-8BEN form. Your US custodian will have provided those for you in their mailing packet.

HOW TO FILL OUT THE W-8 BEN The W-8 BEN asks for your name, address (must be legal) not just a Post Box, Town, Zip Code, Phone number, Country and account number.

It then requests that you state (by signing your legal name) that you are the beneficial owner of this account; that you are a foreign person; that the income that this form relates to is not connected to any trade or business in the US; and most importantly, that you are not a former US citizen or long-term resident subject to expatriation issues.

It refers to things like tax treaties. Bermuda does not have a tax treaty with the United States. Tax treaty countries entitle citizens to lower taxation of US income, in some cases.

The signed submission of the W-8BEN form identifies you as a Non-Resident Alien. No, not the kind from outer space, although sometimes brokerage firm treatment of its customers can border on that notion, particularly after they have gotten your money and sold you a commission product.

At this point, it may be helpful to you to review some of the IRS tax rules for NON-RESIDENT ALIEN.

WHAT IS TAXABLE? Non-resident aliens (NRAs) investing in US investment products in the Unites States are taxed on dividends and may be taxed short-term capital gains This 30 percent tax is withheld at the source of the income by the US custodian, the net amount is sent out of the country to you.

While we are at it, NRAs may also be taxed (at the same rate) on United States Social Security Administration payments, annuities, pensions, and qualified retirement plans, etc.

This has been a source of sadness and great surprise to more that a few Bermudian widows of United States citizens.

WHAT IS NOT TAXABLE Non-resident aliens are not taxed on portfolio interest and long-term investment capital gains.

And herein lies the biggest problems you may face, getting your money or your profits back INTACT from your US custodian or brokerage firm.

While the tax laws state you are not subject to taxation on these two items, you are dealing with firms that process millions of transactions everyday.

While your onshore broker may be qualified, the back office staff may not understand the withholding rules at all.

If there is any doubt in their mind at all that your paperwork is not in order, they will default to the Internal Revenue Service rule regarding any offshore address, and it is a double whammy, they will withhold 31 percent of the sale proceeds. Well, who cares about a few dividends, you say? What happens when cashing out your account after a losing session? You have not made a profit at all, but on your $5,000 or $50,000, for example, the brokerage firm withholds 31 percent -- approximately $1,500 or $15,000. Off your money goes, into limboland.

And now the fun process of trying to penetrate the complexity of US tax laws from another country, long-distance (every phone call probably costing you $30).

It is well to remember that the United States Internal Revenue Service regulates the reporting requirements on income that all US companies (not just brokerage and mutual fund firms) must comply with.

These rules are burdensome, in some cases very punitive; and many have been designed and implemented to eliminate the loopholes that US taxpayers living offshore (or investing offshore) have used and continue to use to evade taxation. It may be your misfortune to be caught in the middle of this `tangled web'.

Note that these are IRS fighting words, not mine! They have made it extremely clear they are going after US citizen tax cheats in some of the most far-reaching legislation yet.

HOW CAN YOU AVOID THESE PROBLEMS? Probably the best strategy when dealing with the voice at the other end of the phone is to ask, ask, and ask until you understand. And to immediately review any statements you receive from US onshore investment firms.

If you catch the mistake in withholding before the end of the calendar year, and protest vigorously, your chances of getting it reversed (by the firm) are fairly good.

It may cost you a fair amount in time and aggravation, but asking for the legal/tax department could tip the scales in your favour.

If you wait until after the end of the year, your erroneous withholding is reported (and the money sent) to Internal Revenue Service. Now, in order to get your own money back, you will have to file a US Tax return for Non-Resident Aliens. And if you do not have a NRA TPIN (taxpayer identification number), you must obtain one in three steps; 1: by paying $25 dollars to have the American Consulate on Middle Road verify the authenticity of your passport; 2. and then filling out a form W-7 which goes directly to Internal Revenue Service requesting a TPIN. That takes about three months to obtain; 3. then, filing a United States 1040NR tax return.

Refunds on these erroneous withholdings are running around four months. How many Bermudians or other expatriates have any idea how to file a US 1040NR to retrieve their own money? OPPORTUNITY COST LOST Not only is your money sitting idle for anywhere from 2 months to a year or more, earning nothing; but, what a paper trail you are laying right to Internal Revenue Service's doorstep. IRS may pay you some interest on your money; however, the opportunity cost lost forever while this money remains dormant can be significant.

When making any investment decisions, research your options carefully and weigh all the costs.

If you get caught this way, it is also well to note that some brokers, in a high-turnover industry, present for the initial sale, will have moved on and you living offshore are left to sort it all out. Doing investing business through a local Bermudian firm may be very, very reasonable, in retrospect. At least you can have interaction with a live person, a sympathetic ear, experience, and a readable license hanging on a wall. You can be sure they are not happy about these rules, either.

In summation, if you get these forms, DO IT NOW and send them back as soon as possible, air mail, return receipt requested.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Readers needing specific assistance should seek professional advice from their financial advisor.

*** Martha Myron CPA is a Bermudian, a Comprehensive Financial Planner, holds NASD Series 7 license, and is a US tax practitioner. She is Programming Chair for the Financial Planning Association/Bermuda. Questions regarding this article may be sent to at Email: marthamyron y northrock.bm