doing taxes for defendent with a taxable account

[trajan]

I have opened a NISA account for the wife and filled it up. What was left I put on her taxable account (特定口座) with the "source withholding" flag (源泉徴収あり) thinking Rakuten would file taxes and do everything for her.

Yesterday I received a notice from the prefecture and city demanding I also file with them, file what I do not know. I checked with Rakuten to see if they had filed but could not confirm this. I did get the balance, though, and it is positive. Thus, some taxes must be owed.

So, multiple questions:

1. What is Rakuten filing and with whom? I guess the central government. Should I not be receiving the bill at some point so that I (or she, rather) pays whatever is due?

2. As I understand this to be capital gains, does she need to file with the prefecture and city too and, if so, pay additional taxes?

3. Regarding her status as dependent, is there a profit "limit" that would revoke her dependent status? I am thinking now that, if so, I will need to get her insurance, retirement, etc. This seems preposterous but if capital gains are classified as income, then... well, I do not know.

I have probably not explained the situation well. This is the first time I do this and, frankly, I struggle with this sort of thing. Do ask for details if I missed something.

Thank you in advance for your patience.

[sutebayashi]

I wonder if it is a scammer, but perhaps it is for real.

Which year did profits gets realized in the taxable account? Or did the account hold some dividend paying stocks or bonds?
The profits must be prior to 2024 I assume since tax filing time for 2024 is happening now.

I should think the automatic withholding tax should have taken care of it though…

[Bushiman]

I have opened a NISA account for the wife and filled it up. What was left I put on her taxable account (特定口座) with the "source withholding" flag (源泉徴収あり) thinking Rakuten would file taxes and do everything for her.

Yesterday I received a notice from the prefecture and city demanding I also file with them, file what I do not know.

Is your wife working?
Is it gift tax they want you to pay?
Filling a NISA is already over the ¥1.2million yearly gift allowance...

[trajan]

I wonder if it is a scammer, but perhaps it is for real.

Which year did profits gets realized in the taxable account? Or did the account hold some dividend paying stocks or bonds?
The profits must be prior to 2024 I assume since tax filing time for 2024 is happening now.

I should think the automatic withholding tax should have taken care of it though…

Last year's profits.

There is no money in the account, just the stock. Would Rakuten sell some of it to pay the taxes?

I did not think about the possibility of scammers. It won't matter because, if there are taxes to pay, I will go to city hall myself. But the question remains, do prefectural and city taxes apply to investments?

Is your wife working?
Is it gift tax they want you to pay?
Filling a NISA is already over the ¥1.2million yearly gift allowance...

She does not work.

I plan to pay the gift tax separately (or, rather, she will pay it with some of the money I gave her originally).

[adamu]

Yesterday I received a notice from the prefecture and city demanding I also file with them, file what I do not know. I checked with Rakuten to see if they had filed but could not confirm this. I did get the balance, though, and it is positive.

Tax witheld by a Tokutei Kouza is knowns as separate taxation at source, and does not need to be declared even if you do a tax return.

So if they are asking you to file, they mean for other income (but it may be in you interest to declare it anyway, if your wife's income is low, as switching to aggregate taxation may work out cheaper. In that case you should do a National Tax return, not a residence tax one, which will take care of the residence tax, too.).

Aggregate vs Separate Taxation

I think the best course of action would be to take the letter you got to your municipality's tax department and ask them what's going on.

[trajan]

Tax witheld by a Tokutei Kouza is knowns as separate taxation at source, and does not need to be declared even if you do a tax return.

So if they are asking you to file, they mean for other income (but it may be in you interest to declare it anyway, if your wife's income is low, as switching to aggregate taxation may work out cheaper. In that case you should do a National Tax return, not a residence tax one, which will take care of the residence tax, too.).

Aggregate vs Separate Taxation

I think the best course of action would be to take the letter you got to your municipality's tax department and ask them what's going on.

My wife has no other income.

If I understand correctly, you are saying that Rakuten will do the filing on her behalf and then sell some of her stock to pay the taxes. All automatically.

Also, I understand you to say that there should be no other taxes to pay, prefectural or municipal.

A visit to city hall before mid-March seems appropriate. I will wait to get a notification from Rakuten that the filing and payment have been done so that I can take those papers with me.

[adamu]

If I understand correctly, you are saying that Rakuten will do the filing on her behalf and then sell some of her stock to pay the taxes. All automatically.

Rakuten will only file for what happens in Rakuten. You will already have this statement in the account, it's called 特定口座年間取引報告書

https://www.rakuten-sec.co.jp/web/suppo ... rt_sample/

They do not sell stock to pay for taxes. They deduct tax from any dividends paid. If you sell stock, they deduct tax from the profit.

The municipality is not asking you to file to report anything about the Tokutei Kouza (unless they are trying to save you taxes...). There must be some other reason for the request.

[trajan]

Rakuten will only file for what happens in Rakuten. You will already have this statement in the account, it's called 特定口座年間取引報告書

https://www.rakuten-sec.co.jp/web/suppo ... rt_sample/

They do not sell stock to pay for taxes. They deduct tax from any dividends paid. If you sell stock, they deduct tax from the profit.

The municipality is not asking you to file to report anything about the Tokutei Kouza. There must be some other reason for the request.

I had not considered that the eMaxis fund generated dividends. I will look up the statement.

Very helpful, thank you.

[adamu]

I had not considered that the eMaxis fund generated dividends..

It doesn't.

I don't think the request to file taxes is related to the Tokutei Kouza at all.

[RetireJapan]

It sounds like this request has nothing to do with Rakuten. I would ask the tax office what they are referring to, or read their communication more carefully.