DTLVbrit

Hey guys - long time lurker, finally made an account to help contribute to the community and ask some questions that have been on my mind! I tend to get nervous about taxes as I fear screwing something up or forgetting something - so I wondered if I can ask you guys this question!

I have lived in the US as a permanent resident now for 7 and a half years after coming here after graduating university!

I kept my HSBC account open mainly for traveling to the UK and at the time to pay off my debt I had created on my credit card as a student, and to continue my student load repayments! My balance is always below £100 in my checking account - hence never needing to file the FBAR, but I always check the box in the schedule B saying I have foreign accounts.

The other day I logged on to my online account for the first time in a while and saw I had forgotten about a savings account that I had open since being a student that had a balance of 0.30p! It looks like zero interest has been applied in as long as I can go back in my account history (5 years). I was surprised this still existed to be honest. But then I became freaked out! Is this "instant access" savings account something I need to add to my taxes? Is there any reason this may be considered a foreign trust (Form 3520)? I know that there is some conversation about ISA's etc being added, but this is just a standard savings account with no interest being applied in a long time!

So, am I doing everything right? Should I have been filing the 3520 or 3520-a? I can't seem to find a solid answer without scaremongering :/

Thanks for any help guys - I really appreciate it - and hope this stops me from worrying about whether I have done something right or not with taxes!

Hotscot

30p?
Forget about it, close it, transfer the money, donate it...

DTLVbrit

Haha I know it sounds ridiculous, but regardless of the amount, is this the kind of account that warrants a 3520 filing?

Thanks for the reply

Owen778

Don't panic!

No, you don't need a 3520. I'm not sure where that idea came from.

Normal UK bank accounts are treated by the IRS just like normal US bank accounts, apart from the possible requirement for the 8938 (FATCA) and FBAR forms, neither of which you qualify for.

Pulaski

It's a rounding error, literally.

30p (roughly 50¢) would not even "fit" on a US tax return, because you (can) only file on whole dollars. Forget about it, leave the account open, close it, do whatever the he11 you want with it, because I will guarantee the IRS doesn't care!

MidAtlantic

In answer to the more general aspect of the question, a UK bank/savings account would be tax free in the UK. Send FormR85 to the bank/building society.

As Owen778 says, it would be treated in exactly the same way by the IRS as interest on a US savings account.

Owen778

True, but with less than a hundred pounds in a current account I really can't imagine he earns enough interest for it to be worth the effort.

MidAtlantic

Which is why I said in answer to the more general aspect ... it may be helpful to others.

Owen778

Ah, OK. I understood that to mean that you were advising him on a question he hadn't specifically asked.

nun

It's so nice to have a US/UK tax question where you can say that there is no issue at all, no reporting requirement because the value is so low, no interest to report and it's not a foreign trust.

DTLVbrit

Haha I was thinking the same thing! Thanks to everyone who helped and answered my query!

I think the person who mentioned this to me originally believed that all kinds of savings accounts abroad can be classed as foreign trusts.

On a similar note - do I need to report my UK student loan repayments on any part of taxes? The same person mentioned that my student loan could also be seen as a foreign trust (as in transactions would warrant filing the form 3520). I wouldn't think so?!

Cheers everyone

JAJ

When using the term "trust" think of something like a family trust, where someone has transferred property into a trust for the benefit of others. Very few people are trust beneficiaries, whether U.S. or foreign. Usually, it is something that you would know. And if a U.S. resident is the beneficiary of a foreign trust, as so defined, a form 3520 (plus form 3520A) is normally required.

However, a bank account is not a trust. Nor is a loan contract.

DTLVbrit

Thanks for that - missed this message. That makes sense then!

I guess there is a different between a Will my parents may have set up back in the UK (which I am unaware of) and a trust? I know these are usually two different things, but would the IRS consider a Will in the UK where I may be a beneficiary a foreign trust?

Thanks!

Hotscot

No
A will is not a trust.

nun

A trust is a very specific legal entity. If you are in doubt about whether you have a foreign trust ask yourself this question.

"Do I control the money in the account and can I sell and close the account at anytime on my own". If you answer yes then it's not a trust.

So bank accounts, brokerage accounts, ISAs etc are not trusts.

When it comes to foreign estates left after someone dies I was unsure so I let my mothers solicitor be the executor as I didn't want there to be any chance of being a trustee of a foreign trust.