Which Tax Form Should I Select?

Overview: 

3 simple questions can help you choose a tax certification form.   Read the questions and select the form.  For more detailed help, see Tax Information & Reporting.

Question # 1:      Are you a U.S. Person or a U.S. Entity?

• U.S. Citizen • U.S. Business or Organization
• U.S. Green Card Holder • U.S. Domestic Trust
                                       • U.S. Legal Resident

If the answer is YES, complete Form W-9

If the answer is NO, go to # 2.

Question # 2:      Do you have a U.S. Visa?

 

• H-1B Visa Holder • TN Visa Holder         
                                         • O-1 Visa Holder

If the answer is YES, find your status by the "substantial presence test." See More U.S. Legal Resident Info 

If the answer is NO, go to # 3.

Question # 3:      Are you a Legal Resident or Entity of another country?

                                      *Question does Not apply to U.S. Citizens/Entities or Green Card Holders

• Permanent Home Outside of U.S • Entity Formed Outside of U.S.
                                      •Business or Organization formed outside of U.S.

If the answer is YES, complete Form W-8  (U.S. Citizens, Green Card Holders, and Entities still complete the W-9.)

NOT SURE because you work, live, or study in the U.S. then, see More U.S. Legal Resident Info 

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax adviser or refer to the U.S. Internal Revenue Service.

Certify Your Tax Status

Overview: 

Filling out a tax certification form is required to open an IB account.  The forms confirm your tax status in relation to the United States.  Information provided by you may lower or exempt the U.S. tax withholding on your account.

Background: 

This article will help you to:

►Choose the correct certification form                            ►Find your tax treaty benefits

►Fill out and submit your form online                              ►Answer tax certification questions

 

 

 

 

Which Form Do You Pick?

Tax Treaty Benefits

Management of account activity differs for each account type.  IB is a U.S. broker and must follow U.S. guidelines.  3 simple questions help you choose the right form

Some countries have a tax treaty with the U.S.  Find out if you benefit from a lower tax-withholding rate. Tax Treaty Benefit Info

Filling Out The Form

Tax Certification – FAQ’s

The certification form is direct.  Supply basic account information on the true owner of the assets or entity.  Select  W-9 Instructions or W-8 Instructions for help. Seek professional advice for tax questions.  These common questions and answers may help you make an informed decision.  Tax Certification - Frequently Asked Questions

 

 

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.

 

 

How and When to Use a Direct Rollover

Overview: 

This information is for general educational purposes only.  Individuals should consult with their financial adviser or legal counsel to determine how rollover regulations affect their unique situations.

Generally, an investor changing jobs or leaving the workforce may utilize either a Direct Rollover election to continue their retirement savings outside of their employer-sponsored retirement plan.   Assets distributed directly to your IRA from the retirement plan may qualify as a Direct Rollover.

What is a Direct Rollover?

The Direct Rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan, including an IRA.  The contribution to the IRA is called a rollover contribution.  The Direct Rollover method transfers the assets directly from the retirement plan (and not to the IRA owner) into the investor's IRA, avoiding the 20% mandatory IRS withholding.  This option to transfer retirement assets has no age limitations.

Eligible retirement plans include:

  • Employer's qualified pension, profit -sharing, or stock bonus plan
  • Annuity plan
  • Tax sheltered annuity plan (section 403(b) plan)
  • Governmental deferred compensation plan (section 457 plan)

Who do you contact first? 

Contact your retirement plan administrator or the human resources office for eligibility and requirements.  The plan administrator is required to provide a reasonable direct method of asset transfer.   Completion of an IRA Rollover Form provided by the administrator may be required, in some cases.  In other cases, the plan accepts an IRA Rollover Form supplied by your IRA's broker.  Therefore, it is important to check with the plan administrator.

Initiating your Direct Rollover through IB 

For those transfers that require a broker-supplied IRA Rollover Form, Interactive Brokers provides a convenient IRA Rollover Form.  Interactive Brokers will forward the request to the plan administrator or broker for processing.  Funds may be transferred by either wire transfer or check directly to Interactive Brokers.

Before accepting an IRA rollover transaction into an IRA, we require that you review your eligibility for the rollover and certify your understanding of the rollover rules and conditions.  The IRA Rollover Form includes the Rollover Form and an IRA Rollover Certification Form.

The Fund Transfers page within the Account Management lets you notify IB of an IRA Rollover deposit of funds into your account.  Select the Funding tab in the header link and choose Deposit Funds in the Transaction list.   In the Method list, select Direct Rollover.  Complete, sign, and return both forms to the Interactive Brokers address on the form.

Contact Customer Service with any additional questions.

 

 

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this article was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Which IBKR entity carries my account?

Account holders may confirm the IBKR entity through which their account is carried by reviewing the information located at the top of their Activity Statement.

Interactive Brokers Group, Inc. conducts business through a number of broker subsidiaries as outlined below. The IBKR entity through which an account is carried is generally based upon the account holder's country of legal residency or, in the case of an entity, its country of formation. Note that certain entities maintain relationships with others for the purpose of providing services such as clearing and execution and this information is disclosed in the Customer Agreement.

Trading Access to the Indian Financial Markets for Non-Residents

By regulation, trading access to the Indian financial markets for individuals residing outside India is currently restricted to "Non-Resident Indians" ("NRIs") and "Financial Institution Intermediaries" ("FIIs") only.

NRI

NRIs are defined in the Indian Foreign Exchange Management Act of 1999 and the Indian Foreign Exchange Management Deposit Regulations of 2000.

In short, to qualify for NRI status you must:

a. Reside outside of India for more than 182 days per year, and;

b. Hold Indian citizenship, or;

c. Be a Person of Indian Origin as defined in the Indian Foreign Exchange Management Deposit Regulations of 2000.

Please note that applicants must satisfy criteria (a) and criteria (b) or (c) and will be prompted to review the aforementioned legislation and confirm their status at the point of application.  To trade Indian products as an NRI, new or existing clients may apply for an account through the IBKR website.

FII
Currently not supported.

What is the minimum applicant age requirement?

In the case of an account requesting 'Cash' trading permissions the minimum age requirement is 18 (for joint accounts, both parties must be at least 18 years of age). For clients of IB-Japan, the minimum age requirement for a 'Cash' account is 20 years of age.

In the case of an account requesting 'Margin' trading permissions the minimum age requirement is 21 (for joint accounts, both parties must be at least 21 years of age).

An individual or entity who would like to manage an account for a minor may do so using the UGMA/UTMA account structure.

 

 

Does IB offer managed accounts?

 

IB, itself, does not provide advisory services to customers, but we do clear for a rather large number of Financial Advisors who do carry and clear their customer accounts with IB.  As we are not in a position to provide personal recommendations as to Financial Advisors, you would need to research for an advisor on your own and if they are not already affiliated with IB, request that they open an account on your behalf with IB. 

 

You may also wish to  review the website of a US industry regulator such as FINRA (www.finra.org) which provides information regarding selecting investment professionals  along with  a tool referred to as FINRA BrokerCheck which allows investors to check the professional background of individual brokers.

Can I open a paper trading account for practice purposes before opening a live account?

 

IB does offer a paper trading account which allows one to use the full range of IB trading facilities in a simulated environment using real market conditions.  This account, however, is made available only after the regular trading account has been approved and funded. Until that time, we recommend that you try the online demos made available to prospective customers through our website to get an overview of system functionality.   A demo of both the TraderWorkstation or WebTrader trading platforms may be found by visiting our website at www.interactivebrokers.com and selecting the Individuals page.  There you will be presented with a series of links including one titled 'Demos'.

IRA: Understanding Rollovers

Interactive Brokers offers three IRA account types for US persons:  Traditional IRA, Roth IRA, and Simplified Employee Pension plan IRA (a.k.a. SEP-IRA). Rollover transaction options may be available into or out of each account type.

The term IRA Rollover refers to several different movements of funds between US retirement accounts. Select from the list below for a brief description of each rollover type available, as well as the their guidelines.

 

IRA to IRA Rollover

Direct Rollover

IRA to Employer Sponsored Retirement Plan Rollover

12-Month Rule

60-Day Period

 

Rollover Types

1. IRA to IRA Rollover

Funds withdrawn from an IRA and re-deposited into an IRA within 60 days may be eligible for treatment as a 60-day rollover contribution. If eligible, this movement of funds may qualify as an IRA withdrawal of funds without any penalty or taxes.   

Tax Reporting - IBKR will report the withdrawal of funds as an IRA distribution and the re-deposit of funds as an IRA rollover contribution to the IRS. The IRS receives Form 5498 (IRA Contributions) and Form 1099-R (IRA Distributions). US investors do not include the Form 5498 with their tax filing, but do include the 1099-R. Click IRA Tax Reporting for details.

2. Direct Rollover

Funds received or withdrawn from an employer-sponsored retirement plan and deposited directly into an IRA. The 20% tax withholding of funds by the plan sponsor is waived when funds are rolled directly into an IRA.

Tax Reporting - IBKR will report the deposit of funds from an employer-sponsored retirement plan as an IRA rollover contribution to the IRS. The IRS receives Form 5498 (IRA Contributions). US investors do not include the Form 5498 with their tax filing. Click IRA Tax Reporting for details.

3. IRA to Employer Sponsored Retirement Plan Rollover

Funds moved directly from an IRA into an employer's retirement plan are deemed rollover contributions. Not all retirement plans accept rollovers from IRAs. Investors should consult the plan sponsor to determine eligibility.

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Limitations & Guidelines 

12-Month Rule

Distributed funds from an IRA may be rolled into another IRA only once every 12-month period. The rule applies to funds withdrawn from each separate IRA. The 12-month period begins the date funds are received, not on the date funds are deposited into another IRA. (See IRS Publication 590 for limited exceptions to the rule.)

60-Day Period

Distributions from an IRA or Employer Sponsored Retirement plan may remain eligible for the tax-free rollover treatment only when contributed to another qualified plan within 60 days of receipt. Generally, funds re-deposited outside of 60 days are not tax-free.  The withdrawal of funds is taxable. The deposit into another IRA is treated as a regular contribution.  (See IRS Publication 590 for limited exceptions to the rule.)

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Click here to return to the Retirement Account Resource page.

Disclaimer: IBKR does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the US Internal Revenue Service.

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