SunnyDave

I moved to the US in 2003 (married a US Citizen in the UK in 2000 & moved to the US in 2003 with a Green Card) and have no intention of moving back to the UK, I'm still a Green Card holder but intend to file for Citizenship within the next year.

I've maintained a minimal UK Bank account, only used for family to deposit birthday/Christmas monies for my son which is then drawn out over here, it's not had more than a couple of hundred pounds in it so no big deal there.

I have a UK Defined Benefit (Final Salary) Pension plan from the company I left in 2003 & had no idea of it's value until I received a transfer valuation last year (CETV), I was just under the assumption that it would start paying out at age 60 (I'm 54 now) and that's when I would have to start declaring the income, until recently, I had no idea there were any other options.

Now the questions :
1. Was I required to disclose this on my Tax Returns / FBAR each year, even though I didn't have any valuation of it and have never drawn anything from it ?
2. If so, am I able to file backdated FBAR's & if so, how do I calculate a value when I never received anything until last year ?
3. As a Defined Benefit scheme, does this only need to be disclosed once I start drawing from it or if I go through the complicated process of transferring this our into a SIPP (after getting the regulated advice etc etc - which I've seen in another thread)
4. Is there something else I'm missing ?

I appreciate your help / advice.

Thanks

SanDiegogirl

Hubby and I have pension funds in the UK (SIPS) and have declared them on our tax returns each year (we don't take any distributions from them).
We do Turbo tax and its asks if you have any Foreign Assets accounts and we have declared them there.
Sorry can't help with other questions

Glasgow Girl

1. Technically final salary schemes have no value until you start drawing for them so you could make an argument that there is no need to declare it on an FBAR, and Form 8938 with your tax return. However it is never good to have to argue with the IRS so better to declare it on both forms with a zero value, UNLESS you have a transfer value in which case you should use the transfer value as the declared value and that is what you would use to determine if you meet the thresholds to file those forms. In your case if you received the transfer value for the first time in 2020 then you can file the relevant forms by the deadlines for this year, which I think is May 17th and be in full compliance.

2. You can back file the FBARs for up to 6 years with no penalty provided you have no other issues with your foreign accounts. If you have filed Form 8938 (if relevant) AND declared any interest and paid the tax on foreign accounts, however minimal, then you are good on that front. In your case, because the first time you received a transfer value was in 2020 it sounds like there is no need for you to back file FBARs as the first one would be for the 2020 year and you still have time to file that one in a timely manner.

3. Per (1) any pension fund needs to be declared on FBARs and Form 8938, subject to the thresholds. No one ever got into trouble over reporting but plenty of people have major issues by not reporting, so my advice is, if in doubt report it even if you have zero value. In any case you now have a transfer value so you have to do so. SIPPs must also be declared to the treasury on FBARs and to the IRS with your tax return, again subject to the reporting thresholds. Some argue that a SIPP is a foreign trust and requires Form 3520 to be filed with your tax return, others just declare it in Form 8938 with the tax return. Form 3520 is quite complex, Form 8938 is easy. The IRS has never made a definitive statement regarding whether or not a SIPP is a foreign trust, and many people (myself included) just declare on Form 8938. If you are ultra cautious you might want to go the 3520 route, but you might need professional help with that form. I lose no sleep using Form 8938, and being sure to report any income taken on the tax return and paying the relevant tax.

4. If you met the threshold for filing Form 8938 with your tax return, make sure you do so for calendar year 2020 even if you have to do an amended return because you have already filed, and do it before the deadline of May 17th. The reason is that if you fail to file Form 8938 they will allow you to correct the situation but if you have been resident for the prior 3 years then they will also penalize you 5% of the maximum fund value. Hopefully the first transfer value you received was in 2020 and not prior to that because if that is the case you are not allowed to correct with out being subject to the 5% penalty.

When you apply for citizenship you have to declare that you are fully compliant and up to date on your US taxes, so definitely take care of this ASAP.

SunnyDave

Awesome explanation, thanks Glasgow Girl.

jamgramet

I went through his a few years ago, and was scared s***less for a while.

Yes, you need to file FBAR for pensions (and any other financial assets - banks, bonds, trusts etc.), even if you are not drawing from them.
Yes, you will have to file for previous years - I can't remember exactly, 5 or 6 I think, and in doing that you have to provide an explanation for why you didn't file.
The penalties can be very serious - and that's what scared me, however, they are really looking for real wrongdoers, not so much folks who made an honest mistake. For example, the fact you aren't drawing money from the pension yet implies no wrongdoing such as tax avoidance.
I hired an accountant firm with experience in dealing with expats, and they did all the filings including coming up with an explanation for late filings. I still had to correct a bunch of details, but I think it was worth it.
Since then, I file FBAR every year, and never heard anything back from the IRS on the late FBARs.
Good luck!

PetrifiedExPat

I also went through the stress and sleepless nights, an accountant got me into compliance and all was well