OMG! A Tax Bill Of USD$4,372.10!!!

Those of you that have had income from other countries will know the term withholding tax... usually calculated at the maximum tax rate if you do not provide their tax department with your Tax File Number. Now there is some exclusions, for example, if you are not a tax resident of the host country, commonly known as ALIEN. You will not be charge withholding tax (but there maybe a cap for some countries to this tax free threshold). This I presume is for attracting foreign investment into the host country economy. All true and far, or so I thought.

Now I dabble in some foreign shares trading with a certain online broking firm. Let's call this broking firm Cheap Remitters & America Proxy - CRAP for short. I sent in my W-8BEN form to CRAP to certify I am an ALIEN when I opened an account with them some 30 months ago..... All was going well and I was doing fine on my way to financial ruins buying junk stocks that are not worth money plus derivatives that expired out of money.

To the executives at ADBE, CORV, GE, GLW, IBM, MDT, MRK and NT: YOUR STOCK SUCKS! YOUR OPTIONS ARE WORTHLESS!

To add insult to injury, CRAP has started charging me BACKUP WITHHOLDING (W-9) from last November. At first the amounts were rather small USD$15.96, USD$0.06 etc. However, recently I have been hit with 28% BACKUP WITHHOLDING (W-9) in the tune of $1956.84 $1807.46 & $526.10. Now if these amounts were calculated based on my capital gains, it really not that bad, however, these amounts were from my capital+profit/loss from sale. I did a quick calculation and the taxes charge to my account was... OH MY GOD! USD$4,372.10!!!! How the hell did they charge me so much taxes?!! On top of that, I have paid $2284.84 commission over the last 30 months. I am starting to faint... dabbling in options trading is definitely not for the faint hearted.

I bought NT at $4.69 on 25 Jun 2004 and the lousy piece of turd has been going downhill on me. Recently, I finally decided to bite the bullet and take the lose at $2.70 only to find out that CRAP has withheld 28% of the proceeds of the sale of my NT shares less commission and applicable tax. Not only did I lose $1.99 a share, I have to pay 28% tax on what's left of my $2.70 plus brokerage fees! You are starting to see my anger in this ridiculous charges?

Basically, it is the same story with another 2 recent sales that I have decided to take profit, but the profit was not enough to cover the tax. Now why the hell would I want to trade in US stock markets when I can only take profit if my shares goes up more that 28%++ so I can cover their bloody 28% BACKUP WITHHOLDING (W-9) plus brokerage and applicable taxes? So I decided to call them. Queue on the phone was approximately 4 mins. I timed them and hung up on the 7th minute to write them an email to ask about all the taxes charged to me. The following is their advise.

Dear ArchPinky:

Thank you for your inquiry. Upon review of your account we show the restriction causing the backup withholding was in error.

On 1/12/2005 a restriction was placed on your CRAP account. The restriction was put on because we believed the Form W-8BEN on file for your account, which certifies your foreign status, expired. Subsequently, your account's tax status was changed to a US taxpayer and the account was restricted.

The W-8BEN on file for you actually doesn't expire until on 12/31/2005. This form expires on December 31st of the year following the third anniversary of the signature date. To remove the restriction, please complete the attached W-8BEN form for all account holders and mail or fax it to:

Cheap Remitters & America Proxy
PO Box 9999 City ST xxxxx-9999
Fax: xxx-xxx-xxxx

Due to the US address on your account we will also need a copy of your visa or passport and a signed letter explaining why there is this US address on your account. Please note that due to US Treasury regulations we must have the original hardcopy of the W-8BEN form, we can no longer accept this form by fax. Until this paperwork is received, we will be required to withhold 28% of the total amount of any sale, dividend or interest received into your account. These funds will be forwarded to the IRS. Once we have confirmed your continued foreign status we will be able to reverse and credit back to you any funds withheld in the current tax year.

We will remove the restriction for the remainder of this year and reverse the funds withheld, however, the restriction could be placed on again next year due the actual expiration of the form.

If you have further concerns or inquiries, please e-mail us from our secure Web site's "E-mail Us" link. For security reasons, we do not answer account specific questions that originate from a source other than the secure Web site.

Sincerely,
Wendi Wanker, Tax Team, CRAP
Division of Cheap Remitters & America Proxy, Inc. (CRAPI)

I went online to verify my address and my address is the same Singapore (foreign) address I used to open the account, How is Singapore a part of USA? I know we watch a lot of US movies and sitcoms, does that mean that USA owns us now? The jokes about Upper Serangoon being U.S. is all true?!!!

I called CRAP again and this time waited 11 minutes to talk to their customer representative. A certain Sany Vowlva attended my call. After I identified myself and spilled my guts about my $4,372.10 tax charged to me and that I have no idea what the statement about my foreign address is all about, she put me on hold for another 10 mins. Came back to say she sees the issue and she will lodge an inquiry into the taxes charged to me by mistake of CRAP's part. I hope I dun have to file US taxes next year to recover the money. Filling in forms is such a pain.