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Another FBAR/tax thread (sorry!)

Another FBAR/tax thread (sorry!)

Old Mar 19th 2012, 7:46 pm
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Default Another FBAR/tax thread (sorry!)

Hi all,
After reading all the posts on tax and FBAR, I am now more than before.

I have been quite successful doing our tax return but I would like to clarify which additional forms I need to submit. The following is our UK situation:
We still have 4 pensions. These are not contributed to, and we don't receive anything from them. 2 are worth more than £10K and we can see their values rise and fall with the tides. The other 2 we don't know much about except that they are worth more than the 2 we do know about.
We have a stocks and shares ISA holding some funds, which also rises and falls with the tides. No money added to it and no income from this and sadly no real increase in value either.
We also have 2 properties which we rent.
We don't have a bank account in the proper sense in as much as it is a One account. Our "savings" offset the amount we owe and we have a facility of money we could draw upon should the need arise.

I have included our income from the property on the tax return, so I'm not concerned there.
But am I correct in thinking I need submit an FBAR form for our pensions?
Do we include the facility on any forms? If so, which forms?
I believe I need to include the ISA somewhere. Again, which forms?
Do I include the houses on any forms?

FWIW, we haven't told any UK institutions that we left, as until we have a GC in our grubby little mits, we might still have to go back. And we did file a UK tax return for last year.

Many thanks for your responses. And apologies if this has been answered before. I just couldn't figure it out.
CWT
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Old Mar 19th 2012, 11:38 pm
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Default Re: Another FBAR/tax thread (sorry!)

I'm not sure about this so I'm having my CPA look into it further - his first response was no as it has no monetry value yet but I'll post his response when he clarifies it for me further.
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Old Mar 19th 2012, 11:47 pm
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Default Re: Another FBAR/tax thread (sorry!)

Originally Posted by 100weight View Post
Hi all,
After reading all the posts on tax and FBAR, I am now more than before.

I have been quite successful doing our tax return but I would like to clarify which additional forms I need to submit. The following is our UK situation:
We still have 4 pensions. These are not contributed to, and we don't receive anything from them. 2 are worth more than £10K and we can see their values rise and fall with the tides. The other 2 we don't know much about except that they are worth more than the 2 we do know about.
We have a stocks and shares ISA holding some funds, which also rises and falls with the tides. No money added to it and no income from this and sadly no real increase in value either.
We also have 2 properties which we rent.
We don't have a bank account in the proper sense in as much as it is a One account. Our "savings" offset the amount we owe and we have a facility of money we could draw upon should the need arise.

I have included our income from the property on the tax return, so I'm not concerned there.
But am I correct in thinking I need submit an FBAR form for our pensions?
Do we include the facility on any forms? If so, which forms?
I believe I need to include the ISA somewhere. Again, which forms?
Do I include the houses on any forms?

FWIW, we haven't told any UK institutions that we left, as until we have a GC in our grubby little mits, we might still have to go back. And we did file a UK tax return for last year.

Many thanks for your responses. And apologies if this has been answered before. I just couldn't figure it out.
CWT
As I understand it from our accountant....

If you have a total of $10K+ in overseas accounts...including pensions etc it must be submitted on FBAR.

As far as the IRS is concerned all overseas accounts, pensions etc must be declared.
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Old Mar 20th 2012, 12:52 am
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Default Re: Another FBAR/tax thread (sorry!)

Originally Posted by Jerseygirl View Post
As I understand it from our accountant....

If you have a total of $10K+ in overseas accounts...including pensions etc it must be submitted on FBAR.

As far as the IRS is concerned all overseas accounts, pensions etc must be declared.
And yet they tell you not to report paper losses/gains only real losses/gains. It doesn't make sense to me that pensions would be the sole exception to that.
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Old Mar 20th 2012, 3:12 am
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Default Re: Another FBAR/tax thread (sorry!)

Originally Posted by Bink View Post
And yet they tell you not to report paper losses/gains only real losses/gains. It doesn't make sense to me that pensions would be the sole exception to that.
They're not. The Form 8938 reporting requirement potentially extends to all (depending on how you wish to interpret this) kinds of foreign financial accounts, regardless of whether they generated income in the year of reporting.

Lots of confusion in this thread as to what's reportable on an FBAR to what's reportable on the new Form 8938 that is submitted with one's tax return. There are multiple existing threads on this.

Last edited by Giantaxe; Mar 20th 2012 at 3:20 am.
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Old Mar 20th 2012, 3:39 am
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Default Re: Another FBAR/tax thread (sorry!)

You have a few issues here:

Firstly - your house - remember you can depreciate the purchase price and any other improvements, this helped me massively reduce tax liability on my rental house - all my costs, income etc are on the Schedule E.

UK Stocks and Shares ISA - Oh dear - I have one of these, and it seems that dealing with them is very complicated - I have lots and lots of Form 8621's filled in and any increases are taxed as regular income.

FBAR - I didn't put my pension on the TD F 90-22.1 last year - I'm still unsure whether I should have done (it is listed on the 8398 form this year).

If this is your first year with an ISA and a House, I would highly recommend you get someone to do the paperwork - I have done, and while there were some errors I picked up on, it has proved very useful.

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Old Mar 20th 2012, 3:57 am
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Default Re: Another FBAR/tax thread (sorry!)

Originally Posted by Giantaxe View Post
They're not. The Form 8938 reporting requirement potentially extends to all (depending on how you wish to interpret this) kinds of foreign financial accounts, regardless of whether they generated income in the year of reporting.

Lots of confusion in this thread as to what's reportable on an FBAR to what's reportable on the new Form 8938 that is submitted with one's tax return. There are multiple existing threads on this.
Massive confusion and the IRS doesn't exactly help out, just fine you if you get it wrong. FBAR is intended for accounts you have signatory authority over - There's no signatory authority on a pension. There's also no easy way to state what a pension is worth and how to report that to the IRS. Do you take the peak value for the year or do you examine the exchange rate fluctuations and work out the highest USD amount?

It's a ridiculous reporting requirement for something that isn't generating income. It should be taxed when it's withdrawn as income and it shouldn't need to be reported until it has a physical value, not just a paper value.
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Old Mar 20th 2012, 4:36 pm
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Default Re: Another FBAR/tax thread (sorry!)

Originally Posted by 100weight View Post
I have been quite successful doing our tax return but I would like to clarify which additional forms I need to submit. The following is our UK situation:
We still have 4 pensions. These are not contributed to, and we don't receive anything from them. 2 are worth more than £10K and we can see their values rise and fall with the tides. The other 2 we don't know much about except that they are worth more than the 2 we do know about.
What types of pensions are they? Employer pensions don't need to be declared for FBAR, although many people will include them just to be safe.
SIPPs etc probably do need to be on FBAR. If you have accounts and with unit trusts etc in them they definitely need to go on FBAR. FATCA, Just include everything.


We have a stocks and shares ISA holding some funds, which also rises and falls with the tides. No money added to it and no income from this and sadly no real increase in value either.
The ISA is not tax free as far as the IRS goes, any gains must be included on your US tax forms. Your stocks and shares ISA is a foreign trust so you'll need forms 3520 and 3520-A and if it holds pooled investments like unit trusts you will need to file PFIC forms 8621.

For your UK pensions you may also need to file 3520, 3250-A and 8621 depending on whether they are qualifying pensions under the treaty and you can make a tax treaty claim to exclude any gains from US taxation. If you don't make the treaty claim on 8833 then foreign trust and PFIC filing will be necessary.

We also have 2 properties which we rent.
We don't have a bank account in the proper sense in as much as it is a One account. Our "savings" offset the amount we owe and we have a facility of money we could draw upon should the need arise.
The account is definitely FBAR and FATAC reportable if it meets the thresholds and any income must obviously be declared in the US.

I have included our income from the property on the tax return, so I'm not concerned there.
But am I correct in thinking I need submit an FBAR form for our pensions?
Do we include the facility on any forms? If so, which forms?
I believe I need to include the ISA somewhere. Again, which forms?
Do I include the houses on any forms?
Basically everything should go on the forms, as I said before if you have employer sponsored pensions the might be exempt for FBAR, but is it worth leaving them off?

FWIW, we haven't told any UK institutions that we left, as until we have a GC in our grubby little mits, we might still have to go back. And we did file a UK tax return for last year.
You should file a P85 with HMRC if you left the country. This will define your new residency. If HMRC still thinks you are UK resident you may well be subject to UK tax on your US income too. You haven't mentioned anything about foreign tax credits you are taking in the UK for US tax and in the US for UK tax you've paid

You are in a very complicated situation and probably need the help of a professional to get this sorted out particularly doing the "mark to market" calculations for the PFIC filing. This covers the main issues for pensions.

http://www.expattaxandlaw.com/Foreign_Pensions_FAQ.html

Last edited by nun; Mar 20th 2012 at 5:33 pm.
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Old Mar 20th 2012, 4:43 pm
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Default Re: Another FBAR/tax thread (sorry!)

Originally Posted by Bink View Post
Massive confusion and the IRS doesn't exactly help out, just fine you if you get it wrong. FBAR is intended for accounts you have signatory authority over - There's no signatory authority on a pension. There's also no easy way to state what a pension is worth and how to report that to the IRS. Do you take the peak value for the year or do you examine the exchange rate fluctuations and work out the highest USD amount?

It's a ridiculous reporting requirement for something that isn't generating income. It should be taxed when it's withdrawn as income and it shouldn't need to be reported until it has a physical value, not just a paper value.
Some UK pensions are FBAR reportable, some are not, it depends on the underlying structure. But ignoring FBAR for a moment, all UK pensions you have have to be dealt with on your US taxes. This requires application of the US/UK tax treaty and while it's not strictly necessary to file an 8833 for some pensions I'd do it just to be safe. If you have SIPP there is debate about their status, but may professionals consider then to be foreign trusts, but that gains within them are still tax exempt under the treaty because of wording in Article 18
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