Geben Sie mir das Buch zurück, wenn Sie damit fertig sind.

English Translation

Give the book back to me when you’re done with it.

why not
Geben Sie mir das Buch zurück, wenn Sie
damit fertig IST ?

“wenn sie fertig ist” would be “when she is done”
“wenn sie fertig sind” means “when they are done”
“wenn Sie fertig sind” means “when you (formal) are done”

The German formal “you” is the same as 3rd person plural, except for the capitalization.

For spoken German, the context determines whether it’s one or the other. The sentence started with “Geben Sie” (an imperative), so it’s clearly formal “you”.

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