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Interactive Options Course
Lesson 6 of 6
‘Do I need to file a US tax return?’ The answer can be fairly straightforward, but once you get away from having only investment income – Interest, Dividends, Payments in Lieu and securities transactions – the answer gets much more complex.
However, this is an area where it is best to consult a tax advisor about your personal situation.
• If you have a standard bank account that earns interest on a deposit – the general answer is that no filing is required.
• If you have a brokerage account with interest, dividends and trading activity the general answer is also no.
• If you own a publicly traded partnership (PTP) and have distributions – then the answer is maybe.
The US tax withheld from dividends, interest and other items is usually close to the amount that would be due in tax. This is especially true if you live in a treaty country and a lower withholding rate has been applied. It is possible that filing a US non-resident return (form 1040NR) would net a small refund, However, the administrative burden of filing, unless you had very large payments would outweigh the benefit.
• If you own a PTP and a large distribution was paid out and withheld (because it is business income) then the answer is maybe. You would need to again weigh the administrative burden of filing, getting a US Individual Tax Identification Number (ITIN) for a small amount of returned tax is cost efficient.
• If you own a more direct interest in a US business, it is likely you will need to file tax. However, this is where your tax advisor can play a vital role in evaluating what is necessary.
• Rents paid directly to a non-US person are required to be withheld upon. This is where a US tax filing is usually necessary.
• Student grants, stipends and teaching fellowships often require that they file. Many educational institutions have offices to assist with US tax filings for non-residents.
Remember that it is both a tax question and a cost question. If you need to hire someone to prepare a US return for you and if it costs $100 and the refund is $20 it is not sensible to file.
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The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.
The information in this material is provided for informational purposes only and does not constitute tax advice and cannot be used by the recipient or any other taxpayer to avoid penalties under any federal, state, local or other tax statutes or regulations, or to resolve any tax issue.
In Mexico do I need pay tax
Hello Irene, thank you for reaching out. All non-US persons and entities are required to complete an IRS Form W-8 to certify your country of tax residence and to establish whether you qualify for a reduced rate of withholding when opening an account. Please view the link below for more information: https://www.interactivebrokers.com/en/support/tax-nonus-initial.php
We hope this helps!
Hi. I have a question about the applied tax treaty status in the IBKR account.
If I already have an IBKR account and my residency country (outside US) has tax treaty with the US, how to confirm that my account already has the lower rate of withholding tax based on the treaty applied? Is this status explicitly stated in the Settings page? Is it automatically applied if the ‘Legal Residence’ field in the Settings page value is a country in the tax treaty?
Thanks.
Hello Adrian, thank you for reaching out. To access and print your Tax Forms and Reports, log in to Client Portal using this link: https://ndcdyn.interactivebrokers.com/AccountManagement/AmAuthentication?loginType=1&action=RM_TAX_FORMS&loginType=1. All non-US persons and entities are required to complete an IRS Form W-8 to certify your country of tax residence and to establish whether you qualify for a reduced rate of withholding when opening an account.
Please reach back out with any additional questions. We are here to help!
Hello, you mention if we have a brokerage account and receive investment income, we usually wont need to file a return as a foreign investor, does “investment income” include earnings from derivatives (options/futures trading)? Thanks in advance!
Hello Ivan, thank you for reaching out. IBKR does not provide tax advice.
I have an IBKR account. How and where can I check/ update my W-8BEN?
Thank you for asking. Please view this FAQ for instructions to update your W-BEN form:
https://www.interactivebrokers.com/faq?id=32666329
We hope this answers your question!
Hello, I am have been living in USA to work full-time with an International Organization (as a non-resident alien). I have updated W-8 BEN Form to brokerage accounts with address in USA. Once I move out of USA and change my address in W-8 BEN Form (other country than USA): 1) How will be my existing investments’ gains in stocks and ETFs will treated for the US tax purposes? 2) Will I have to pay tax on the capital gains from stocks and ETFs during my stay in USA – before I leave the country? 3) How my existing investments during my stay in USA will be adjusted in Interactive Broker Accounts once I move out of USA? 4) Once I move to other country listed where Interactive Broker is available, will I have access to my existing interactive brokerage account from the new country?
Thank you for reaching out. If you relocate to a different country, you will be able to retain your account as long as you are not moving to a country that IBKR is prohibited from transacting business in due to government sanctions.
However, even if relocating to a permissible country, you may be required to initiate a new application and request a manual transfer of eligible assets once your new application has been approved. Whether this step will be required depends upon the country you were residing in and the one that you are moving to as IBKR maintains multiple entities each of which has been formed to carry client accounts based upon local regulatory requirements and IBKR policies. You would need to contact your local Client Service Center to determine if your particular situation requires opening a new account.
Please review this FAQ for information about what withholding taxes need to be paid as a non-US person: https://www.interactivebrokers.com/faq?id=52477332
Please review this FAQ for instructions to update your W-8BEN form: https://www.interactivebrokers.com/faq?id=32666329
We hope this helps!
I’m in Croatia. No treaty with USA. I’ve filled W-8BEN. Are there any other forms to submit to IB? Is IB sending W-8BEN to IRS? 1040NR is used only when treaty is in place? Is IB submitting 1040NR to IRS automatically?
Hello, thank you for reaching out.IRS Form W-8 is used to certify your status as a non-U.S. taxpayer. It is also used to claim reduced tax withholding on dividends and other income paid with respect to U.S. securities. Without proper documentation, brokers may be required to impose exceptional withholding tax on transactions occurring in the account and/or report the account as non-compliant to tax authorities.
Please review this FAQ that explains why more forms may be required: https://www.interactivebrokers.com/faq?id=37140708
IBKR does not provide tax advice. Please consult a tax professional who specializes in your region regarding specific questions.
Please
hi i am from Singapore, non-US. i heard that when 30% withholding tax from dividends when be returned back to us after 1 year, am i correct? Due to we have account with IBKR, the 30% withholding tax will be returned to us back to the IBKR account, is that correct? so there is no need for us non-US for filling any tax return form, am i correct?
Hello, thank you for your question. Please note that we cannot provide tax advice, but you may find this webpage helpful: https://spr.ly/TaxInfocampus
Please consult a tax professional who specializes in your region regarding specific questions.
Hello. I am a dual citizenship holder (living in Hong Kong and also holding XyX citizenship). If I enter Hong Kong as my primary country of citizenship and XyX as another country of citizenship on my IBKR profile (or list both Hong Kong and XyX as my tax residencies), will I be eligible to receive the tax treaty benefits between the U.S. and XyX (i.e., 15% withholding tax for XyX vs. 30% for Hong Kong) on dividend income received from my ETFs?
Hello, thank you for reaching out. Dividends paid on U.S. stocks will be subject to withholding taxes for non-residents. A completed W8 form will allow for a reduced tax rate if a treaty exists between the United States and the holder’s country of taxation; however a valid W8 only allows for a reduction in the tax rate not an elimination of the tax entirely.
Please note: IBKR does not provide tax advice. Clients should consult their tax advisor on how to claim a refund or tax credit.
We hope this helps!