Bad news...see what
EY says below. Best to ask IBKR on their approach so everything is clear.
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Remittance transfer
"Remittance transfer" is defined by cross-reference to the Electronic Funds Transfer Act (EFTA), which applies to banks, money transmitters and others in the business of making electronic funds transfers. The purpose of the remittance︀ transfer provisions in EFTA is to require the RTP to disclose the fees, exchange rate,︁ net amount to be received by the recipient and certain other information.
A remittance transfer occurs when an RTP transfers︃ funds from a "consumer" (defined under the EFTA as a "natural person") to a "designated︄ recipient," whether or not the consumer holds an account with the RTP. A typical use︅ case is individuals from a foreign country who send money to their home country through︆ a money transmitter, although EFTA applies much more broadly, for example, when a US parent︇ sends money to child studying abroad. A remittance transfer does not include a transfer of︈ $15 or less.
A "designated recipient" is any person located in a foreign country and︉ identified by the sender as the authorized recipient of a remittance transfer to be made︊ by an RTP, and may be an entity as well as an individual. The foreign︋ location of the recipient is a requirement, so US-to-US transfers would not result in tax.︌
According to a
2019 FDIC publication that explains EFTA, remittance transfers include:
- "Transfers in︍ cash or by another method conducted through a money transmitter or a financial institution.
- Consumer wire transfers conducted by a financial institution upon a sender's request to wire money from︎ the sender's account to a designated recipient.
- An addition of funds to a prepaid card️ by a participant in a prepaid card program, such as a prepaid card issuer or its agent, that is directly engaged with the sender to add these funds, where the prepaid card is sent or was previously sent by a participant in the prepaid card program to a person in a foreign country, even if a sender retains the ability to withdraw such funds.
- International ACH transactions sent by the sender's financial institution at the sender's request.
- Online bill payments and other electronic transfers that a sender schedules in advance, including preauthorized remittance transfers, made by the sender's financial institution at the sender's request to︀ a designated recipient."
Exceptions
No tax would apply at source︇ if the following to conditions were met:
- The RTP is a "qualified" RTP that has︈ entered into a written agreement with Treasury to verify the status of senders as US︉ citizens or "nationals"
- The sender is a "verified United States sender," which is defined as︊ a US citizen or "national," as verified by the qualified RTP (A "national" owes allegiance︋ to the US but is not a citizen; the category consists almost exclusively of persons︌ born in American Samoa or on Swains Island.)
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