Non-resident alien (US) tax question

[vttt]

Trading Background: I've been trading FX for a couple of years now and have done quite well. My current account balance is slightly over $100K, all of which is pure profit.

Educational Background: Masters in Financial Engineering and I work in risk management. (I am on a work visa.) I mention this because I don't think I just made some lucky calls.

Rant: I think it's total bs that I am a non-resident alien yet considered a resident only for tax purposes. Which means, I have to pay taxes on my worldwide income. Yet, I get no benefits. No unemployment benefits, no welfare if I need it, etc. If I were to get fired tomorrow, I would have to leave the country in 30 days.

Tax Loophole idea: My parents are both citizens of xyz. xyz's citizens are not required to pay taxes on income earned outside the country. So, can I just gift them my $100K (use up a bit of my lifetime gift tax exemption so as to not incur taxes), then have one of them open up an account in say the UK or in the US and I have a written agreement with them where I trade their account on their behalf for no pay. I don't need the money so I won't be withdrawing any of it. But in case I need to, it shouldn't be an issue since gift taxes are paid by the giver and not the receipient.

Would this work?

 

[fbirdien]

$100K, all of which is pure profit.

I believe you are aware that for the profit you already made you have to pay taxes, no matter what. If the broker is based in US they might have provided 1099-B.

So, can I just gift them my $100K (use up a bit of my lifetime gift tax exemption so as to not incur taxes), then have one of them open up an account in say the UK or in the US and I have a written agreement with them where I trade their account on their behalf for no pay. I don't need the money so I won't be withdrawing any of it. But in case I need to, it shouldn't be an issue since gift taxes are paid by the giver and not the receipient.
Would this work?

This could work if you manage to not have your name on all the paper work and trust your parents 100%. Besides tax implications, it will also eliminate the filing of FBAR.

Parents could form a LLC company offshore( eg. Isle of Man) & then LLC can open an account with FX broker ( could be non-US reputed FX broker ). Parent's user name and password for account & platform can be used to trade. Careful steps need to be taken while moving big amount like 100k as IML checks are triggered at banks at both receiving and sending end. Also the receiving country's national policy might have an annual cap on the total amount of USD that can be brought in .

Other consideration is , if you are consistently profitable and some day envision to add a zero to the current 100k , then UK would be the best first world country tax haven in the world ( look up "UK tax for non-domiciliaries") . If at some point you move to UK, you can open offshore FX account in you own name and trade, and pay taxes on only the amount you repatriate back to UK.

PS : I am not a qualified tax professional/accountant , above statements are based on my research.

 

[vttt]

Thanks for the information. Already paid taxes for 2013. Writing that check was painful.

I trust my parents 100%. The money would never move to their country. I plan to wire it directly to their offshore bank account and then have them wire the funds to "their" broker. When I need some cash, I can just have them wire me the money.

The problem is that they are pretty clueless about stock investing, less alone trading FX and derivatives. I wonder if it will be a problem getting an account approved for them. I was thinking if I'm their "money manager", I could convince a brokerage firm to open an account for them.

Interactive Brokers is not an option. Any suggestions for a broker are highly appreciated.

The FBAR rules don't apply if I'm just an unpaid director of an offshore corp, correct? I'd have to be a shareholder.

I believe you are aware that for the profit you already made you have to pay taxes, no matter what. If the broker is based in US they might have provided 1099-B.




This could work if you manage to not have your name on all the paper work and trust your parents 100%. Besides tax implications, it will also eliminate the filing of FBAR.

Parents could form a LLC company offshore( eg. Isle of Man) & then LLC can open an account with FX broker ( could be non-US reputed FX broker ). Parent's user name and password for account & platform can be used to trade. Careful steps need to be taken while moving big amount like 100k as IML checks are triggered at banks at both receiving and sending end. Also the receiving country's national policy might have an annual cap on the total amount of USD that can be brought in .

Other consideration is , if you are consistently profitable and some day envision to add a zero to the current 100k , then UK would be the best first world country tax haven in the world ( look up "UK tax for non-domiciliaries") . If at some point you move to UK, you can open offshore FX account in you own name and trade, and pay taxes on only the amount you repatriate back to UK.

PS : I am not a qualified tax professional/accountant , above statements are based on my research.

 

[nth]

Trading Background: I've been trading FX for a couple of years now and have done quite well. My current account balance is slightly over $100K, all of which is pure profit.

Educational Background: Masters in Financial Engineering and I work in risk management. (I am on a work visa.) I mention this because I don't think I just made some lucky calls.

Rant: I think it's total bs that I am a non-resident alien yet considered a resident only for tax purposes. Which means, I have to pay taxes on my worldwide income. Yet, I get no benefits. No unemployment benefits, no welfare if I need it, etc. If I were to get fired tomorrow, I would have to leave the country in 30 days.

Tax Loophole idea: My parents are both citizens of xyz. xyz's citizens are not required to pay taxes on income earned outside the country. So, can I just gift them my $100K (use up a bit of my lifetime gift tax exemption so as to not incur taxes), then have one of them open up an account in say the UK or in the US and I have a written agreement with them where I trade their account on their behalf for no pay. I don't need the money so I won't be withdrawing any of it. But in case I need to, it shouldn't be an issue since gift taxes are paid by the giver and not the receipient.

Would this work?

It doesn't work that way.

"You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year."
http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test

If you ever plan to apply for citizenship, it could bite you if you try to start beating around the bush with the IRS. I went through an audit a couple years ago. And, trust me it's no fun if the IRS decides to start probing around in your business, even when you are doing everything up to code.

If you are not up to speed, they start tacking on hefty penalties along with interest. It's no joke.

Get with a professional tax adviser as soon as possible. Don't take the word of any website.

Best to you.

 

[fbirdien]

I plan to wire it directly to their offshore bank account ...

This activity needs to be planned carefully as you might be aware any amount over 10K triggers compliance checks at sending& receiving banks . Sending and receiving account name would be different , so AML compliance would have to be taken into consideration. PM if you like, can share my exp.

The problem is that they are pretty clueless about stock investing, less alone trading FX and derivatives. I wonder if it will be a problem getting an account approved for them.

100k client will make the retail broker drool, they would open an account for a chair with that kind of money. You are just speculating , try calling couple of brokers , no need to go into details of trading experience , frequency of trades etc. After opening quite a few retail accounts , I think its just paperwork. All they care about is when money'ld be ACH'ed to them and when the commission register starts ringing.

I was thinking if I'm their "money manager", I could convince a brokerage firm to open an account for them.

I would not put my name anywhere in the system. If the broker opens parent's account why would you need to be parent's official "money manager" on paper, when you can just use their logon credentials ? Beneficiary section on broker account could be the only place where your name could exist.

Interactive Brokers is not an option. Any suggestions for a broker are highly appreciated.

There is a broker thread on this forum that can be looked up. I heard LMAX was good FX broker on some other forum . Not sure if by derivatives you mean futures , but if thats the case then Advantage futures is good as per the input of some people on this board

The FBAR rules don't apply if I'm just an unpaid director of an offshore corp, correct? I'd have to be a shareholder.

lol... "director, offshore, shareholder " ,age old trick , US authorities are way too familiar with that stuff. Like I mentioned earlier , no name on any paperwork would be worth wile. I am not sure about FBAR, but if not FBAR there might be some other gov tracking system that might trigger red flags if offshore structure is used.