I have received notice that the Individual Taxpayer Identification Number (TIN) on my IBKR account does not match that of the IRS. What do I need to do?
Why Your TIN May Be Considered as Incorrect
If you are an individual taxpayer your TIN will be your Social Security Number (SSN) or, in the case of resident and non-resident aliens your Individual Taxpayer Identification Number (ITIN). Often an individual taxpayer TIN does not match IRS records because a name has changed through marriage, divorce, adoption, etc., and the change has not been reported to either IBKR or the SSA. Other times the account may not contain the correct SSN or ITIN of the actual owner or the title on the account does not match that used for filing tax returns (see Note 2 below).
What You Need to Do
You will need to locate your social security card and, if lost or misplaced, contact your local SSA office to obtain a replacement. If you are a resident and non-resident alien you will need to locate your ITIN card or authorization letter and, if lost, or misplaced contact the IRS to obtain a replacement. You will then need to compare the name and TIN on your social security card or ITIN card/authorization letter with the name and TIN on your IBKR account. Information regarding your IBKR account, including a form for updating your information, will be made available upon log in to Client Portal.
This comparison will require that you take one of the following four actions:
1. If the name and TIN on your account agree with the name and TIN on your social security card or ITIN card/authorization letter - Contact your local SSA office to determine whether the information on SSA’s records is different from that on your social security card and to resolve any problem. If you are holding an ITIN card or authorization letter contact the IRS to reconcile their records. a. If the SSA or IRS determines that the information is different, provide photocopies of documentation supporting where the change has been made (e.g. revised social security card or ITIN card/authorization letter, or letter from the SSA or IRA stating that their records have been amended, along with proof of identity and proof of address). b. If the SSA or IRS determines that the information does in fact agree, provide a copy of an SSA or IRS letter confirming that conclusion along with proof of identity and proof of address.
2. If the TIN on your account is different from the SSN on your social security card or the ITIN on your ITIN card/authorization letter, but the name is the same - Update your TIN through the form made available upon login to Client Portal. You do not need to contact the SSA or IRS. Provide photocopies of supporting documentation (social security card or ITIN card/authorization letter along with proof of identity and proof of address).
3. If the name on your account is different from the name on your social security card or ITIN card/authorization letter, but the TIN is the same on both – a. If the name on your account is correct, contact the SSA to correct the name on your social security card or IRS to correct the name on your ITIN card/authorization letter. Provide photocopies of supporting documentation (revised social security card or ITIN card/authorization letter along with proof of identity and proof of address); b. If the name on your social security card or ITIN card/authorization letter is correct, update your personal information through Client Portal. Provide photocopies of supporting documentation (social security card or ITIN card/authorization letter along with proof of identity and proof of address). You do not need to contact the SSA or IRS.
4. If both the name and TIN on your account are different from the name and TIN on your social security card or ITIN card/authorization letter – a. If the name and TIN on your social security card or ITIN card/authorization letter is correct, update your personal information through Client Portal. Provide photocopies of supporting documentation (social security card or ITIN card/authorization letter along with proof of identity and proof of address. You do not need to contact the SSA or IRS; b. If the name and TIN on your account is correct, contact the SSA to correct the name and SSN on your social security card or IRS to correct the name and ITIN on your ITIN card/authorization letter. Provide photocopies of supporting documentation (revised social security card or ITIN card/authorization letter along with proof of identity and proof of address). Proof of identity may be met through a government issued passport, driver’s license or green card (the document must be valid and include your name and photograph). Proof of address may be met through current lease, utility bill (less than 1 year old), mortgage statement or other evidence of property ownership. Supporting documentation may be scanned and sent via email to accountmanagement@interactivebrokers.com (please place your Account ID in the email subject line, Attn: Tax Reporting) or faxed to 312-984-1032.
IMPORTANT NOTES
1. Once you have identified the source of the mismatch, you will need to log in to Client Portal and follow the instructions for confirming and/or updating your information. Account holders who fail to provide a combination of account name and TIN which can be authenticated against IRS records within 30 days of being notified of a 1099 mismatch may be subject to backup withholding and account restrictions.
2. Certain entity type accounts such as grantor trusts or single member LLCs may file taxes under the SSN of the individual rather than having an EIN assigned. To avoid a TIN mismatch in these situations, the name of the individual taxpayer should be entered in the first box of the W9 titled 'Name (as shown on your income tax return)' and the name of the entity on the second line titled 'Business name, if different from above'.
Links:
How can I access historical statements and how will I obtain tax reports once my account has been closed?
Background:
After an account has been closed, the account holder will continue to be provided access to Client Portal for the purpose of reviewing and printing historical statements along with historical as well as the following year's tax forms (once issued). Access is provided using the same user name and password combination in place at the time of closing. Accounts which were enrolled in the Secure Transaction Program will no longer need a security device to log into their account.
Will the consolidated statement reflect the tax basis choices of client accounts?
Overview:
Clients have the ability to select one of three tax basis methods, First in First Out (FIFO), Last in First Out (LIFO) and Max Losses. The method selected will affect the P&L values which are posted on the statements.
In an advisor structure, where the advisor has the ability to create a consolidated statement, those P&L values posted will properly reflect the tax basis choice as these calculations are done independent of how a statement may be viewed.
IRA: Roth Conversions
Background:
Traditional and SEP IRA owners may process a full conversion of cash or securities into a Roth IRA that has identical trading capabilities at Interactive Brokers.
An IRA Roth Conversion is a transfer of Traditional, SEP, or SIMPLE IRA assets into a Roth IRA as a rollover or conversion.
While Interactive Brokers is unable to re-designate a Traditional or SEP IRA as a Roth IRA (e.g. change the same Traditional IRA into a Roth IRA), you may still complete a Roth conversion without sending funds to another brokerage firm. See below for methods to convert your IRA funds into a Roth IRA.
Internal Full Conversion Between IB Accounts
Conversion By Rollover Deposit
Click Conversions and Recharacterizations for additional information.
Converting Your Funds
The IRS permits eligible IRA owners to contribute funds to a Roth IRA from a Traditional or SEP IRA. Regardless of the conversion method used, the entire transaction is treated as a conversion. There are three (3) conversion methods available for converting into an IB Roth IRA account:
(1) Internal Full Conversion (Cash & Securities)
(2) Rollover Deposit (Cash only)
(3) Trustee-to-Trustee Transfer (Cash only)
- Internal Full Conversion: You may open a Roth IRA at IB and then request a Full (all assets) conversion of a Traditional or SEP IRA through Account Management. All assets will be internally transferred into the Roth IRA. Internally processed Roth conversions submitted by 8:00 PM EST are processed the next business day.
[In Funds Management of the Traditional or SEP IRA, choose: IRA Conversion to Roth Account. Or, click Position Transfers, then select IRA Conversion - Transfer Assets to Roth Account.]
Note: Select the funding option IRA Conversion or Re-characterization in the Funding section of the account application to perform a full conversion. For step-by-step instructions, click here. See Partial IRA Conversions to perform a partial conversion.
- Rollover Deposit: You can receive a distribution from an IRA (Traditional, SEP, or SIMPLE) or qualified plan held outside of Interactive Brokers and roll the funds over (contribute it) to a Roth IRA within 60 days after the distribution.
[In Funds Management of the Roth IRA, choose the following deposit method: Cash Transfers. In the Transaction List, select Deposit Cash. In the Method List, select Check, Wire, Automated Clearing House (A.C.H.), or Direct Rollover. Choose Rollover as the IRA Deposit Type.]
Note: Selecting Rollover designates the deposit as a "conversion contribution," provided funds originate from an IRA or qualified plan. Select Cash Deposit instructions for step-by-step deposit instructions.
- Trustee-to-Trustee Transfer: You can direct the trustee of an IRA (Traditional, SEP, or SIMPLE) or qualified plan held outside of Interactive Brokers to transfer a cash amount into the Roth IRA account at IB. Use the IRA Transfer-In Authorization form to initiate your request.
[In Funds Management of the Roth IRA, choose the following deposit method: Cash Transfers. In the Transaction List, select Deposit Cash. In the Method List, select Trustee-to-Trustee.]
Important Note: IB is not responsible for the tax reporting of any funds distributed from the Traditional or SEP IRA held at another firm. Customers should speak with a tax advisor before requesting an IRA distribution as withholding tax may apply. Customers must contact the other firm to ensure that the IRA distribution is appropriately designated.
IRS Tax Reporting
The deposit of funds into the Roth IRA is treated by the IRS as a rollover contribution, regardless of the conversion method, and reported to the IRS on Form 5498. Form 5498 is available by May 31 for the prior year's contributions.
The disbursement of funds from the Traditional or SEP IRA is treated by the IRS as a distribution and reported by IB on the Form 1099-R (report of the distribution). This tax form is available by January 31 for the prior year's distributions.
For additional information on Forms 5498 and 1099-R, see US Year End Tax Forms.
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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.
Glossary terms:
What is the meaning of Mark-to-Market and First In, First Out?
Overview:
Mark-to-Market (MTM) refers to the method of calculating values for positions based on daily movements of the position calculated against the closing or settlement price of the product for that day. At the end of each business day, the open positions carried in an account are credited or debited funds based on the settlement price of the open positions that day.
First In, First Out (FIFO) is the practice of using the first initiated position in a security as the trade that is paired off against the most recent closing trade in that same security. This method is often used for tax accounting purposes. In other words, it is the method of valuing securities which uses the oldest items in inventory first.
What is the Mark-to-Market calculation method and how does it work?
Overview:
Mark-to-market (MTM) is a method of valuing positions and determining profit and loss which is used by IBKR for TWS and statement reporting purposes. Under MTM, positions are valued in the Market Value section of the TWS Account Window based upon the price which they would currently realize in the open market. Positions are also valued using the MTM method for statement purposes and it is one of the methods by which profit or loss is computed. Other methods available include First In, First Out (FIFO), Last In, First Out (LIFO), and Maximum Loss.
MTM P&L shows how much profit or loss was made over the statement period, regardless of whether positions are open or closed and with no requirement that closing transactions be matched to an opening transaction. The MTM methodology rather assumes that all open positions and transactions are settled at the end of each day and new positions are opened the next day. For purposes of simplification, MTM calculations are split into two calculations: 1) calculations for transactions which took place during the statement period, referred to as Transaction MTM on the statement; and 2) calculations for positions which were open prior to the start of the period, referred to as Prior Period MTM on the statement.
Background:
For example, assume 100 shares of hypothetical stock XYZ are purchased at $50.00 on Day 1; another 200 shares are purchased on Day 2 at $52.00; 200 shares are sold on Day 3 at $53.00 and another 100 on Day 4 at $53.50. Also assume that the closing prices for XYZ on Days 1, 2, 3 and 4 are $50.50, $51.50, $54.00 and $54.00, respectively. The MTM statement calculations for each day are as follows:
Day 1
Transaction MTM - $50.00 ((50.50 – 50.00) * 100 )
Prior Period MTM - $0.00
Total MTM - $50.00
Day 2
Transaction MTM - ($100.00) ((51.50 – 52.00) * 200 )
Prior Period MTM - $100.00 ((51.50 – 50.50) * 100 )
Total MTM - $0.00
Day 3
Transaction MTM - ($200.00) ((54.00 – 53.00) * -200 )
Prior Period MTM - $750.00 ((54.00 – 51.50) * 300 )
Total MTM - $550.00
Day 4
Transaction MTM - ($50.00) ((53.50 – 54.00) * 100 )
Prior Period MTM - $0.00 ((54.00 – 54.00) * 100 )
Total MTM - ($50.00)
Total - $550.00
IMPORTANT NOTICE
Account holders should note that profit and loss calculations are calculated for statement reporting purposes solely and should consult with their tax advisor regarding their obligations with respect to reporting gains and losses for tax reporting purposes.
Are non-US residents subject to withholding for tax purposes?
Overview:
Information relating to tax obligations is reported as required to the tax authorities within your country of residence as well as other countries if trading products subject to any local withholding requirements. Unless specifically directed by a taxing authority, IBKR does not withhold taxes on proceeds from security sales. We are required by US tax law, for example, to withhold US taxes on dividends paid by US corporations to foreign persons at a rate of 30%. This rate may be lower if the US has entered into a tax treaty with your country. In addition, investment interest income is not subject to US withholding. All withholdings for non-US persons and most entities will be reported on Form 1042-S at the close of each year. For further information refer to IRS publication 901 and/or your tax advisor.
