If you don't know how to go about getting it back, they'll simply keep it, warns Mike Arman. They shouldn't - this is your money - and yes, you can get it back.

The theory is simple. Just figure out how much money you actually didn't make, and apply for the refund. Capital gains taxes in the US are based on profits, so if you made no profit, you owe no taxes.

The practice is of course a lot more complex, but it can be done and you can get a substantial or even complete refund of your money the IRS kept at closing.

Start with your records - you kept good, complete records, right? We'll want to document every expense related to the property you sold.

You'll need a US-based tax preparer (accountant) to file the return. This person gets the mind-numbing task of sifting through all these records and expenses to determine which ones and how much of each one is deductible from the total profit. A talented accountant should be able to prove to the IRS's complete satisfaction (i.e. legally) that you didn't make any profit at all on this sale, and are thus entitled to a refund.

The IRS will send it, too! Do not be in a hurry, however. The only time the IRS moves quickly is when it takes money, it moves with glacial slowness when it gives it back. Figure on a minimum of ten to twelve weeks from the date the return was filed.

We are still not quite done. The check will be in US dollars, and is best sent to a US destination. While the IRS knows (or at least suspects) that there is a whole world out there, they seem to have great difficulty mailing checks to any place that doesn't have a US post code.

To avoid this problem, have the check mailed to someone you have appointed as your US representative. The authorization form is mailed with the tax return. The check is payable to YOU, but mailed to your representative. The representative cannot negotiate the check (this is a nice way of saying he cannot steal the money).

If your US representative deposits the check into your US dollar bank account, it will be stuck there since US banks won't do a wire transfer unless the account owner physically walks in the door to order it. (So near and yet so far . . .) If you deposit the IRS check in the UK, it may take 60 days or more to clear, and you will get walloped on the exchange rate and fees, so that's no better.

However, if the check is deposited in the US closing agent's escrow account, they can order a wire transfer through a currency converter (unless you feel like enriching your bank), and the funds then appear in your own bank account, in your own currency in just a few days.

Try not to spend it all in one place!

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Article published in September 2006