Duration: 2:57
Level: Beginner

‘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.

Study Notes:

‘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.


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

  1. 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.

    1. 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!

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