Is 1099-INT from Robinhood cash sweep taxable for Non-Resident Aliens?
I recently received a 1099-INT from Robinhood for interest earned through their cash sweep program. As a Non-Resident Alien (NRA) last year, I'm trying to figure out my tax obligations. I understand that most interest income reported on 1099-INT forms is generally not taxable for NRAs, but I'm confused about whether Robinhood's cash sweep interest falls into one of the exempt categories. When I checked the IRS guidelines about nontaxable types of interest income specifically for nonresident aliens, I couldn't determine which category would apply to Robinhood's cash sweep program. Does anyone know if this type of interest income from Robinhood qualifies for the NRA exemption? Or is this something I need to report and pay taxes on?
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AstroExplorer
The question of whether interest from Robinhood's cash sweep program is taxable for a Non-Resident Alien depends on the source of the interest. Generally, most U.S. source interest paid to NRAs is exempt from U.S. tax under what's commonly called the "portfolio interest exemption." Robinhood's cash sweep program typically moves uninvested funds into partner banks or money market funds. If your cash was swept into FDIC-insured partner banks, this would be considered U.S. source bank deposit interest, which is specifically exempt from U.S. taxation for NRAs under Internal Revenue Code Section 871(i)(2)(A). If your cash was invested in money market funds, it gets slightly more complicated, but those interest payments are typically also exempt for NRAs as "portfolio interest" under Section 871(h).
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Giovanni Moretti
•Thanks for the explanation! Would the NRA still need to report this income on their home country's tax return even if it's exempt from U.S. taxation? And do they need to file any forms with the IRS to claim this exemption, or is it automatic?
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AstroExplorer
•The exemption from U.S. tax on this type of interest is generally automatic - you typically don't need to file anything special with the IRS to claim it. Robinhood should have already applied any required withholding if the interest wasn't exempt. As for reporting in your home country, that depends entirely on your country's tax laws. Most countries tax their residents on worldwide income, so you would likely need to report this income on your home country's tax return even if it's exempt from U.S. tax. I'd recommend checking with a tax professional familiar with your home country's tax system.
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Fatima Al-Farsi
When I was dealing with a similar situation last year, I found this tool called taxr.ai (https://taxr.ai) that really helped me figure out my NRA tax obligations. I uploaded my 1099-INT from Robinhood and it analyzed exactly which parts were taxable for me as an NRA. It parsed through all the different types of interest and explained that my bank deposit interest from the cash sweep was considered "interest on deposits with U.S. banks" which falls under the exemption in Section 871(i)(2)(A) of the tax code. Saved me from overpaying on taxes I didn't actually owe as an NRA.
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Dylan Cooper
•Does it work with other investment platforms too? I have interest from Interactive Brokers and I'm not sure if the same rules apply or if there are different exemptions.
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Sofia Perez
•Idk sounds too good to be true. How does it know all the international tax treaties and stuff? Did you have to provide your country of residence or tax treaty status?
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Fatima Al-Farsi
•It works with all the major investment platforms - I've seen people use it with Interactive Brokers, TD Ameritrade, and others. The rules are based on the type of interest, not really the platform itself, so it applies the same analysis to determine which exemption might cover your specific interest income. For international tax treaties, yes you do need to select your country of residence during the setup process. It then applies both the general NRA rules and any specific tax treaty provisions that might give you additional exemptions. It was pretty thorough and saved me from having to read through hundreds of pages of tax treaty documents.
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Sofia Perez
Just wanted to update about my experience with taxr.ai (from my question above). I was super skeptical but after dealing with 3 different accountants who gave me conflicting advice about my NRA status and Robinhood interest, I gave it a try. Uploaded my 1099-INT and it immediately identified that my cash sweep interest was U.S. bank deposit interest exempt under Section 871(i)(2)(A). It even generated the right tax forms showing which parts were exempt and which weren't. Better than paying $350 for my last accountant who completely missed this exemption and had me overpay!
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Dmitry Smirnov
After spending WEEKS trying to get through to the IRS international tax line for clarification on my Robinhood 1099-INT as an NRA (seriously, called like 20+ times), I finally used https://claimyr.com to get through. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that interest from Robinhood's cash sweep program when deposited in FDIC-insured banks is considered bank deposit interest and is NOT taxable for NRAs. They also explained that I don't need to file a US return just for this exempt interest. Huge relief since I was about to file and pay tax on it unnecessarily!
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ElectricDreamer
•Wait how does this Claimyr thing actually work? They somehow get you through the IRS phone queue faster? Seems fishy.
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Ava Johnson
•No way this works. I've tried everything to get through to the IRS international tax line. If this actually worked I'll eat my hat. The wait times are insane and they just disconnect you after 2 hours.
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Dmitry Smirnov
•It's actually pretty straightforward - they use an automated system that dials repeatedly and holds your place in line, then calls you when they reach a human. For the international tax line, it took about 90 minutes instead of the 3+ hours I was experiencing when trying myself. The IRS doesn't give any special treatment - you're still going through the normal queue, but the service handles the waiting and redialing if there's a disconnect. I was skeptical too but when you're desperate to get a straight answer before filing deadline, it's worth it. And yes, the international tax line is notoriously the worst one to try to get through to!
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Ava Johnson
I'm eating my hat right now. After my skeptical comment above, I tried Claimyr out of desperation since my tax filing deadline is this week. Got through to the IRS international tax department in about an hour. The agent confirmed exactly what others here have said - as an NRA, interest from Robinhood's cash sweep program is considered U.S. bank deposit interest and exempt from U.S. taxation. They even emailed me the specific regulation citation (Section 871(i)(2)(A)) that I can keep for my records. Huge relief after stressing about this for weeks!
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Miguel Diaz
Just to add some nuance here - it depends on whether you're 100% sure you qualify as an NRA for tax purposes. If you pass the substantial presence test, you might actually be considered a resident alien for tax purposes even if you're a nonresident for immigration purposes. If you spent more than 183 days in the US (calculated using the formula for the current year and previous years), you could be a resident alien for tax purposes and the interest would be taxable. Worth checking your exact status!
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Amara Nwosu
•Thanks for bringing this up! I was in the U.S. for only 60 days last year on a student visa, so I'm definitely an NRA according to the substantial presence test. I appreciate the tip though - I hadn't considered that my physical presence could affect how the interest is taxed.
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Zainab Ahmed
One more thing - did your 1099-INT from Robinhood have any entries in Box 2 (Early withdrawal penalty)? I'm also an NRA and noticed that even though the interest itself is exempt, if there are any early withdrawal penalties, those are handled differently.
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Connor Byrne
•Not OP but I had this exact situation. Box 2 early withdrawal penalties actually reduce your taxable income even if the interest itself isn't taxable for NRAs. Kind of a weird situation where you might want to file just to claim that deduction if it's substantial.
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Omar Zaki
I want to add something important that hasn't been mentioned yet - make sure you have the proper documentation to support the NRA exemption. Even though the interest is generally exempt, you should keep records showing your non-resident status. If Robinhood didn't have your proper tax status on file (Form W-8BEN), they might have withheld taxes at 30%. In that case, you'd actually need to file Form 1040NR to get a refund of the overwithholding, even though the underlying interest income isn't taxable. Also, double-check that your 1099-INT specifically shows interest from bank deposits versus money market funds. While both are typically exempt for NRAs, the specific exemption sections are different and it's good to understand exactly which applies to your situation.
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StarSailor
•This is really helpful advice about the W-8BEN form! I just checked my Robinhood account and I'm not sure if I ever submitted proper tax documentation when I opened it. How do I verify if they have my correct NRA status on file? And if they withheld taxes that I shouldn't have paid, is there a deadline for filing the 1040NR to get the refund?
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