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Duration: 2:57

Contributor: Interactive Brokers

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.

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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.

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.

Supporting documentation for any claims and statistical information will be provided upon request.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Tax-Related Circular 230 Notice

The information in this presentation 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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