Tax handling

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Account management

This page discusses features principally used when DriveWealth’s Account Management product is enabled. Partners managing customers on their own won’t have these workflows available.

During the customer onboarding process, DriveWealth utilizes the information sent through the create User request to generate either a W9 or W-8BEN tax form. This process happens automatically and requires no additional input or validations by you or the user.

Tax forms on file are stored as Physical Documents and can be retrieved from that API.

Tax withholding

Certain types of transactions require DriveWealth to withhold tax on behalf of a customer. For example, when a customer receives a dividend, if they are not a US customer, an amount of that dividend will be withheld and paid to the US IRS based on that customer’s country of tax residency.

For example, if the following dividend gets paid to a customer based in the United Kingdom:

{
    "finTranID": "GL.b0043e24-117d-4429-82dd-9b23ea82ef74",
    "finTranTypeID": "DIV",
    "accountAmount": 30.43,
    "accountBalance": 280.43,
    "comment": "BPY dividend, $0.3043/share",
    "instrument": {
      "id": "476b40ee-3ff9-46af-85af-fec572d13d23",
      "symbol": "BPY",
      "name": "Brookfield Property Partners L.P."
    },
    "dividend": {
      "type": "CASH",
      "amountPerShare": 0.3043,
      "taxCode": "FULLY_TAXABLE"
    },
    ...
}

A subsequent Transaction will be posted to the Account noting the following tax withholding:

{
    "finTranID": "GL.ddf3fd42-c62e-4cd1-a0c6-6dcfe046be97",
    "finTranTypeID": "DIVTAX",
    "accountAmount": 4.56,
    "accountBalance": 275.87,
    "comment": "BPY tax, 15% withheld",
    "instrument": {
      "id": "476b40ee-3ff9-46af-85af-fec572d13d23",
      "symbol": "BPY",
      "name": "Brookfield Property Partners L.P."
    },
    "dividendTax": {
      "type": "FOREIGN_TAX",
      "rate": 0.15,
    },
    ...
}

Ongoing tax documentation

Throughout the lifecycle of an account, tax documents are generated as a result of activity incurred and taxes withheld by DriveWealth. All tax forms are calculated based upon the US tax season which is between January 1st, and December 31st.

Generally before the end of February, all tax forms are submitted by DriveWealth to the IRS for processing and acceptance. The day in which end of year forms are made available to end customers varies each year:

Not all customer accounts receive an end of year tax form. To understand if a customer qualifies for a tax form generation they must meet the following thresholds:

• Interest and Dividends exceeds $10, or
• There were sell side transactions throughout the year that exceeded $20, and
• The account is not a tax-advantaged account (e.g. a retirement account)

Review the Official documents section to learn how to retrieve these files.

W-8BEN information updates

The IRS requires that a customer updates their W-8BEN every 3 years, after the date of account creation. To facilitate the change in information, DriveWealth makes available two methods:

• A hosted website: DriveClient
• The User API
• Theuser.inforequired.created Event

The primary points of information that need to be either confirmed or changed include:

• Full Legal Name
• Address
• Tax Identification Number

Events & DriveClient

After subscribing to the user.inforequired.created event, partners should notify the relevant customer to update the above information or in some cases upload a document when the user.inforequired.created event is generated. . This can be done all via the DriveClient.

After this information is submitted DriveWealth will automatically generate a new tax document on behalf of the customer. A taxform.created will automatically be generated upon completion of the generation.