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Do I Really Need to File a US Tax Return?

Lesson 6 of 6
Duration 2:57
Level Beginner
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‘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 on which there is 33%
withholding – 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.

Partnerships

• If you own a PTP and a large distribution was paid out and withheld on at 33% (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.

Direct interest in a US business

• 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
• Rents paid directly to a non-US person are required to be withheld upon. This is where a US tax
filing is usually necessary.

Students

• 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.

Join The Conversation

If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

6 thoughts on “Do I Really Need to File a US Tax Return?”

  • Irene

    In Mexico do I need pay tax

    • Interactive Brokers

      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!

  • Adrian

    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.

  • Ivan

    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!

    • Interactive Brokers

      Hello Ivan, thank you for reaching out. IBKR does not provide tax advice.

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Disclosure: Interactive Brokers

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.

Disclosure: Tax-Related Items (Circular 230 Notice)

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.

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