Hi. First up, I’ll definitely contact a tax attorney with this but thought asking the Internet won’t hurt either. A numbskull idiot who has nothing to do with the United States (no citizenship, never a resident), not having once stepped foot on the US soil, has been investing with a US broker for the past 5 years or so. This idiot has a child, and the latter also has an account opened at a US brokerage and also has nothing to do with the United States. Throwing all caution to the wind, the idiot gifts a sum of money to their child by way of transferring it directly from their brokerage account to that of their child without even a slightest clue of potential tax implications in the United States. After a month or so, the idiot accidentally stumbles upon an article which in eloquent terms explains how f’d they are since transfers of cash between two non- resident aliens through American financial institutions are taxed in full amount without any right to use gargantuan life-time exemptions (which only apply to US residents). Mastering all 2 brain cells in their head, the idiot calculates that they basically owe IRS tens of thousands of dollars on the gift made. Henceforth, I will refer to myself in the usual manner. I’m at a loss of what to do. All the articles which I’ve found mostly state that such transfers are definitely taxed in the US. I’m so reluctant to do anything to attract attention from the IRS on the other hand, since I’ve also read that the chances of them finding out themselves are slim to none since they don't monitor NRA's at all. However, I’ve also read up on penalties for late filing and tax evasion and the situation can potentially get uglier by orders of magnitude. I’m sure the IRS won’t be contacting me and letting me know whether the tax is due or not. Therefore, I’m left with a simple choice-either contact them myself like a sucker with the question and incurring their taxing wrath, even though they might not have found out at all, or hold my tongue and pretend that nothing happened with the risk of having to be contacted by the IRS years later with huge penalties as a cherry on top. It is my choice to make, I do realise that, but what would you do/advise to do in such a case?
I probably owe IRS tens of thousands of dollars in taxes without stepping on the US soil
- Thread starter Howthis
- Start date
Robert Morse
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Can you cite any of these? I have not been able to find any tax or withholding on a CASH transfer at a US Bank or US Broker from a parent to a child for a foreign person.
The gift is probably not taxable, but the child might need to report it.
https://www.greenbacktaxservices.com/knowledge-center/foreign-gift-tax/#:~:text=No, the US does not,is not subject to taxation.
https://www.irs.gov/businesses/gifts-from-foreign-person
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Breathe easier, as you should be exempt from all tax obligations.
"Note: If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U.S. resident broker or other agent, you are NOT engaged in a trade or business in the United States."
That rider obviates your gains as ECI.
Effectively Connected Income (ECI) | Internal Revenue Service (irs.gov)
Excuse this idiot for the asking, but just how did you manage to open a US brokerage account without ever setting foot here? I thought they verify your social security and residential address, among other things, before giving you the green light to trade.
Isn't that referring to the Green Card? Green card holders are usually foreign nationals living in the US, so they actually have a verifiable address. But how is that possible for someone like OP?
Not sure, I am going only by what that splash page shows. I don't know what "ID number" means. Does that mean a ITIN, or a passport number?
Either way, I am taking the OP at face value and that somehow, he and his son are non-resident aliens who have a US brokerage account.
Yeah, I hear ya. Also I don't wanna detract this thread from OP's main concern. Before I make my exit, however, just wanna point out that those who can obtain ITIN are:
- A foreign national legally residing in the United States who, based on number of days in the country, is filing a U.S. tax return.
- A foreign national who is a student, professor, or researcher in the United States and is filing a U.S. tax return, but does not qualify to receive a SSN.
- A dependent or spouse of a U.S. citizen or lawful permanent resident (meaning their spouse is already in the United States).
- A dependent or spouse of a foreign national on a temporary visa (ditto).
Exactly. So to your point about that splash page, if their "ID number" means ITIN, it is not meant for non-resident aliens.
If it means a passport ID number, then it could mean NRAs.