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I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

 
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8 Replies

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

You need to contact the brokerage firm and inquire as to the reason.

 

Are you subject to backup withholding? If so, the firm will withhold a certain percentage of the proceeds, typically that would be 24% at this point in time.

 

Again, contact your "trading co".

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

It is an offshore trading account. They are saying that per IRS and trading company rules, I have to pay the taxes separately , and the trading company will connect with IRS to get it paid. They cannot deduct it directly from my trading account. 
is this typical for offshore trading accounts?

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

It is an offshore trading account. They are saying that per IRS and trading company rules, I have to pay the taxes separately , and the trading company will connect with IRS to get it paid. They cannot deduct it directly from my trading account. 
Do you know if this is typical for offshore trading accounts?

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

The firm has reporting requirements (and withholding requirements if you did not provide a TIN), and you may have reporting requirements.

 

You would be best advised to consult with a tax professional in your area.

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

This sounds suspicious. Ask them to quote you the exact IRS rule and provide the legal citation for it.

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?


@fjhaypainter wrote:

It is an offshore trading account. They are saying that per IRS and trading company rules, I have to pay the taxes separately , and the trading company will connect with IRS to get it paid. They cannot deduct it directly from my trading account. 
is this typical for offshore trading accounts?


Generally speaking, a payer may be required to withhold some of your proceeds for income taxes.  This is called backup withholding, and the money is sent to the IRS in your name and counts as a tax payment for the year.  When you file your return, you will report the income as taxable income, and you will include the backup withholding as a tax payment.  If your overall payments are too high, you get the difference as a refund; if the payments are not enough to cover the tax, you will owe an additional payment.

https://www.irs.gov/taxtopics/tc307

 

The actual tax you will owe on any withdrawal depends on the type of activity.  Capital gains are taxed as regular income for short term gains (investments held less than a year) and at a lower rate for long term investments held more than 1 year.  Interest and dividends are usually taxed as ordinary income.  You usually pay some income tax on interest and dividends in any year they are paid, even if you don't withdraw them, but you don't pay tax again when you withdraw.  You pay tax on capital investments when you sell them (cash out), and you can determine what your gain is.  Your broker should be sending you a 1099-B, a 1099-INT and a 1099-DIV (or a "combined tax statement") every year, that you include on your income taxes.

 

I don't know exactly what rules require a broker to withhold backup taxes.  Have you provided them with your social security number?  If you refused, they will definitely need to withhold backup taxes.

 

If you want to know if your broker is behaving in a legitimate manner, I would ask if you have been getting proper tax statements each year (your statement for all 2021 activities was due January 31, 2022, although they are often late if the investments are complex).   If you had this account last year, did they send you a statement?  Will they remove the tax requirement if you provide their social security number?  It seems unusual for them to want the tax payment in cash rather than taking it out of the proceeds of your account.

 

But on the other hand, you're kind of stuck, aren't you?  It' an offshore account, which you picked for some reason (tax advantages, secrecy, etc) and your other option is to leave the money there forever, isn't it?

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?

Thank you for the information.  This is the first year that I did trading from a non-US based platform. I am told that for crypto currency proceeds, they (trading)  are required to pay the tax first before disbursing funds.  

Yes, I’m kind of stuck and not sure if this is a scam. 

I am trying to withdraw funds from my trading acct. the trading co is asking me to pay 22% from my gross proceeds before they can release the funds. Is this normal?


@fjhaypainter wrote:

Thank you for the information.  This is the first year that I did trading from a non-US based platform. I am told that for crypto currency proceeds, they (trading)  are required to pay the tax first before disbursing funds.  

Yes, I’m kind of stuck and not sure if this is a scam. 


While they may be required by law to withhold the tax (assuming they even follow US law, which is generous of them to do if they are really an off-shore company), the IRS does not require them to collect the tax separately. That's a rule or policy of the exchange, not the government.

 

At worst, you lose 122% of your money.  At best, they do it properly and send the 22% to the IRS, and it counts toward your taxes.  In the middle, they keep the 22% so you get 78% back.  I don't think anyone here can offer more specific comment, unless there is a user that has used the exact same exchange recently.

 

Good luck. 

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