robtuck

When I moved over, I didn't really have much by way of savings (zero) and a small pension fund that stopped from my employer on the transfer that had a transfer value of <6k. My bank account has only been used to send money back to once every two months to pay off some old UK debts.

I also had a Final Salary Pension scheme from an employer I left a decade ago, which I understood to be of zero current value and would only be an issue for FBAR limits once I reach an age to draw on that pension.

Long story short, my UK bank account + the defined contribution pension are likely to pop out over the $10k mark this year at some point, so FBAR has come back into my sights. However, on doing some research I may have spooked myself. The Final Salary Pension, since moving across the pond, has started showing a Cash Equivalent Value - to entice me to transfer I believe, so it is not a real cash value right now. That amount is well above the $10k mark and would also push me above the limits for reporting an 8938 (if I used the total value it shows). I've gone from thinking I should be prepping for an FBAR to worrying if I have to actually go and re-do previous years tax filing?

Firstly, does that Cash Equivalent Value actually mean anything in terms of FBAR/8938?
If it does, I presume I need to go back to 2018 (first time I see a value appear at all) and submit amended Tax forms if over limits as well as FBAR?
If it doesn't, will just adding an FBAR for 2021 suffice when time comes due next year?

I did try going through the wealth of posts on this subject and tied myself in knots!

Glasgow Girl

My understanding is that a final salary scheme does indeed have a $0 value until you start to receive an income unless it has a known transfer value. Being aware of a transfer value now complicates your situation. You have two options.

The first option is to fix the situation using the Streamlined Domestic Offshore Procedure, SDOP. That requires that you file 3 years of amended returns to include Form 8938 and 6 years of FBARs (or however many are applicable), plus of course this years, and a statement of reasonable cause as to why you failed to file. They WILL penalize you 5% of the maximum value of your account, and you will likely have to pay someone to do this for you. However, it will give you immediate piece of mind that the matter is resolved.

The second option is to do the same thing outside of the SDOP which is an option provided by the IRS. https://www.irs.gov/individuals/inte...ion-procedures. It is basically the same process but the IRS reserves the right to apply the relevant penalties for failing to file Form 8938 (which the SDOP waives in return for the 5% penalty) which could be $10,000 for every year that you failed to submit it. The IRS would not necessarily apply a penalty of $10,000 for every year, they could apply it to all of the years or none of them, or however many they feel like. You would hope that since there was no income associated with this account, and no activity, that the IRS would apply no penalty and that may well be the case, but it is not guaranteed. According to the IRS taking this approach is not a red flag for an audit, your chances of being audited are the same as anyone else submitting an amended return. If you are not audited it is extremely unlikely that any penalty will be applied, and if you are audited it could well be zero up to the unlikely but possible worst case. Either way the matter is resolved because you have followed an accepted IRS procedure for resolving the issue.

So pick your poison.Go with the first option with a known cost and immediate piece of mind, or the second option an an unknown cost, possibly zero possibly a lot more and the uncertainty of knowing whether or not you have a penalty at all for up to the 3 years that they have to audit your amended returns.

Or, if you can prove that you had no knowledge of the transfer value prior to Calendar Year 2021, then you could take the view that reporting it for Tax year 2021 onwards is sufficient, and hope that the IRS agree with you if you are ever audited for tax year 2021 or prior. This is similar to Option 2, but since you are not refiling any taxes you should reduce your audit probability. I would not choose this option if you were aware of the transfer value prior to the start of Calendar Year 2021.

Note that I am not a professional advisor of any kind. The above is my understanding of the situation and my opinion only and should not be interpreted as advice in any way,

neill

With the USD dropping fairly significantly against GBP and CAD in the past few months, combined with global investments generally doing well, increasing substantially in value over the past 12 months, this is bound to rope in some individuals that in previous years didn't have to file an FBAR.

MidAtlantic

As long as you have fully declared your overseas income on your 1040 and paid the tax, there is no issue. https://www.irs.gov/individuals/inte...ion-procedures
Just go ahead and submit the FBAR: https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Glasgow Girl

As many people are finding out these days, IF all income has been declared and tax paid then the FBARs are fairly easily corrected. However the problem is now the Form 8938 requirement if those thresholds are exceeded, and the OP did exceed those thresholds so needs to resolve that issue as well.

OldJuddian

I have one pension that is DB that does not give a value (at least not yet, and I check yearly for the FBAR/8938) and another that does, as well as a DC one that has its value. So I report the two with values, and leave one out. Maybe it is better to report all three, and select the amount not known for the DB one without a value. Then if a value ever appears start reporting it from that year? Or does a pension reported with no value look even more suspicious?

durham_lad

If you are doing an FBAR anyway I would list that DB pension and put a value of zero. When I do my FBAR each year there are savings accounts with zero value that I report, I only stop reporting them once they have been closed all year so no chance of my bank reporting them via FATCA and raising a flag.

robtuck

Thanks for the info - appreciate it is always generic to a degree and the onus is on me. I literally became aware of the Transfer Value last week - I think the company has been trying to persuade people to transfer off of the final salary. I didn't even realise I had a Final Salary pension! It was only this need to review the FBAR given my Bank Account was likely to have some money in it for a change that made me track it down (didn't even have any paper work - I know). The defined contribution one only ever had about $5k in it as I'd barely started contributing before moving over.