Do you have to pay taxes before withdrawing funds?

I have some funds in my trading account that I want to withdraw. My broker is telling me that I have to pay Taxes before the withdrawal can be approved.
He was saying something about an IRS law that went into affect in 2019 that says they must collect and report taxes on their clients behalf to avoid tax evasion.

Is this true? Or are they trying to scam me in some way.

Hmm idk about that. I thought all taxes are due AFTER withdrawal cause then you’d need documents from your broker etc…

Who is this broker!

this is the broker

fxkovnerfx . com

I’m in the UK and not under IRS regulations but this sounds odd if all you want to do is draw out some capital.

If you want to withdraw all capital, I am sure the firm would be correct in forwarding tax due on your behalf, though obviously you must have done due diligence that this is within their T&C’s and they are a legitimate firm and they give you proof of tax received by the IRS.

But I thought tax due on trading activities was due at the end of the tax year?
As its not the end of the tax year, how does the firm know you will have a tax liability when you get there? And did they pay the tax due at the end of the last tax year?

I don’t think any brokers would take any taxes.
Your taxes are your business, and not theirs, especially if their clients are foreign, and different tax rules apply.

Why would a broker take on the extra burden of this?
I think your brokers are scamming you.

Does babypips have a thread of white-listed brokers?
Would that be a good idea?

There is a precedent for companies deducting and paying taxes for clients, at least in the UK. Here this is standard practice if you have capital in an interest-paying savings account and you are liable for Income Tax on the basis of your combined salary and interest payments. The firm make the deductions at the end of each tax year and send you documentary evidence.

In addition, your employer does the same thing with your salary - Income Tax is deducted at source on a monthly basis.

Tax deduction at source has been standard practice here for many years, but it does not cover Capital Gains Tax.

So a broker would never try to collect taxes for capital gains?

I had no problem withdrawing some small amounts but when I tried withdrawing everything in my account they said that I needed to pay my taxes on the profits before the withdrawal can be approved

Then I tried to withdraw only my principal amount since it’s not taxable but they will not allow me to withdraw any amount now unless I pay my taxes and complete the entire withdrawal… he said because I started a withdrawal requesting that I take all of my funds out that I need to now pay my taxes and complete the withdrawal…

So they won’t allow me to even load any more funds into my account until I complete this withdrawal and pay my taxes… they said I would get some kind of tax certificate after…

This screams dodgy broker to me. As a trader you are responsible for paying your own taxes. That isn’t the broker’s job.

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We’re not talking about a UK broker so I can’t advise whether this broker located elsewhere ever would deduct CGT from profits. But I just say its possible they could be required by the tax authorities to do this - it depends on the tax authorities.

I have never heard of them. How did you discover this broker?

I was referred to them by someone. They took to me to do trading and used this broker.

They are UK and China based…

I hope you don’t have a significant amount of money with them. :confused:

is it possible for a broker to manipulate the metaTrader5 app during a trade to show fake profits ?

I’m sure they can do many things lol.

I surject you tell your broker to minus the text from your account and send you the balance, like that you would lose much.

I did. They refused to do it and said the tax payment needed to come from an outside source :joy:

It is clear, they want to make you their cow cash. You need some calculation here, if you could leave it to them,it unfortunate brokers are doing this.

No, there is no rule that says traders should pay states taxes before withdrawing funds from the Forex market. If he is asking for taxes before withdrawing, it is likely a scam.

I have been through quite a few brokers but none of them ask for taxes when withdraw so that likely a scam to keep you from withdrawing your money. Almost all brokers are registered in tax heaven so they pay low to no taxes to begin with.