nun

You've always had to include foreign pensions on your US taxes if you are a "US person", even if they don't come to the FBAR or FATCA thresholds. Contributions and or gains in foreign accounts have to be dealt with. If you are lucky a treaty exemption will make it relatively simple....but you have to take the treaty position and file an IRS 8833. Also make sure you deal with ISAs and UK unit trusts appropriately, which usually means selling them before you move to the US.

jjmb

We have only ever listed our banks. You mean you have list your pensions even if you are not receiving any monies from them yet - we don't retire until 2023 and the endowment (old mortgage account) doesn't mature for a few years yet, so again no actual income. We told the accountant about them but he didn't say at any time we had to declare them. Doesn't help that my husband company has evolved into 3 different entities over the years, so getting info, is complicated to say the least. Dreading,next year tax return with the sale of some company shares through a buy out by google, they are all over the place and again split between at least 3 different companies from the original shares. Worth nothing until this buy out That's how we found ourselves with a tax accountant the first time

nun

Is your accountant UK and US qualified and dealing with cross border taxes on a regular basis? She/he may have applied for a treaty exemption for your pensions.

The pension thing is often forgotten about. Generally employer sponsored pension plans don't need to be included on FBAR, but the situation is in flux for FATCA. Even so as a US person you should be including your worldwide assets on your US taxes. The gains inside foreign pensions are not automatically sheltered from US taxes. If the foreign pension is a qualified pension under the tax treaty, then a claim can be made to shelter the gains from US tax until income is taken out. If you don't do this the IRS will consider the pension as a foreign trust.

jjmb

thanks, I really don't know if he is UK/US qualified, will have to check that out. He did work out a complicated stock issue as few years ago and had quite a number of foreign engineers (tech industry so lots around) as clients.

I would assume as they are all company pensions they will be under the tax treaty. How can there be gains if you are not receiving anything? Just confirms what I have thought for a long time, way too complicated for me.

nun

If you had a defined contribution plan where your contributions are invested in things like mutual funds or unit trusts those investment would produce dividends and capital gains distributions (hopefully) and your account balance would increase. Inside a pension wrapper that increase in value is usually tax deferred in the country where the pension is setup, but that exemption isn't automatic in another country. For a final salary plan the increase in value would have to be calculated from an annual account value or other data you got from your pension provider. But if you get a treaty exemption from tax on the gains before income is taken you avoid all that.

As a UK/US dual citizen planning a move to the UK I will have to declare all my US retirement funds to HMRC and I will claim the exemption from UK tax on any gains within them on my SA100 self assessment under Article 18(1) of the Uk/US tax treaty. If you have UK pensions and live in the USA you should declare your UK pensions to the IRS and claim the same exemption on form 8833.

Tony79

Glad i'm not the only onenot liking this form, has been my first year doing tax and all but this form has been pretty smooth. First I was using Turbotax online which let me put all 3 of my accounts on but would not let me see schedule B. Then when I went back to it this month it told me my 2nd two accounts had to be submitted using the desktop version. lol! Now on the desktop version which seems quite a bit better.

Anyway, I think i'm ready to file but want to know if I filled Part III in correctly. In Section Ia "Interest" I put my amount in the first column, and then in the third column "Schedule B Line 2". Is that correct? Line 2 of part one of Schedule B shows that same amount (though with cents - Turbotax seems inconsistant with rounding)

robin1234

Strangely, the Instructions for Form 8938 do not give any specific guidance for filling out Part III, but it looks straightforward;
Pt. 3 Section 1a Col 1; amount of interest
Pt. 3 Section 1a Col 2; "1040 line 8a" (or whatever your specific case)
Pt. 3 Section 1a Col 3; "Schedule B Pt. 1 Line 2" (or similar)

This is just my interpretation, others may see it differently.... !!

Odo

Hello all. Just signed up to the forum. I've been here six years, married to a US Citizen, with a green card since 2008.

For me, up until now I haven't been declaring any of my UK interests as they were either small pensions, and I thought not declarable as no income is received from them currently. ISAs, where I have not received any income, and a bank account with pocket money for home visits that receives less than $10 interest per year.
I considered any gains (and losses) in pensions and isas to be unrealized capital gains and wouldn't need to be declared until I receive income from them or sold them. For the ISAs, paying capital gains tax on the difference between buy and sell price.
This year I intend to complete an FBAR as the two ISAs and bank account are $14k. They've been around the $10k mark so hadn't FBAR'd previously as honestly, I didn't know I had to. I thought the Tax Treaty would apply to the pensions, although I didn't know I had to file a form for that either. I don't have to worry about 8938 thankfully.

With the information I've read in this thread, I need to make a decision on how I go about completing this years return. Whether to continue as I have been or consider a major change.

Does anyone know someone who has actually had the IRS come down on them for these scenarios?

robin1234

However, you say "Line 2 of part one of Schedule B shows that same amount"..... Remember on Schedule B you have all your bank interest listed, including any US banks, whereas of course the 8938 only lists out your FOREIGN bank interest, not US...

theOAP

I would suggest you may have some research to do. You might start by searching this forum, or the UK Yankee.com (US and UK Tax) forum, for the consequences of owning UK Stocks and Shares ISAs, and the obligations for filing regards US tax.

Don't be mislead by the simple treatment of UK Cash ISAs for US tax. They are a completely different circumstance.

As for the remainder of your post, hopefully others will be along to answer your questions shortly. I'm staying out of this one.

Odo

That does not make me feel good, theOAP, but thanks for replying.

Odo

Has anyone transferred any UK based assets to family members over there so it no longer becomes your tax burden? I'm thinking as mine are so small, relatively, it may make more sense to get rid of them instead.

nun

Do you mean me theOAP?

You must include your worldwide income and gains on your 1040 etc

Depending on the exact nature of the pensions these may well be covered by the US/UK tax treaty, but if you do not take a treaty position to exempt any gains from US tax they will be taxable under IRS regulations, probably as foreign trusts.

Just because a gain is protected by some tax deferral wrapper in the UK like an ISA or pension does not mean that the IRS recognises it. The Treaty can be applied to exempt gains in many UK pensions, but not for cash or stocks and shares ISAs. These are not included in the treaty so you definitely have to pay US tax on any gains. The stocks and shares ISAs are foreign trusts and may also require PFIC filing.

You have to claim Tax Treaty benefits on form 8833, the benefits are not automatic.

I cannot speculate on what the IRS might do, but I will say that it appears you have left US taxable assets off previous years taxes and have not correctly dealt with your UK pensions and ISAs. I would get into compliance by seeing a tax professional and filing amended taxes. The amounts seem quite small so any penalties and taxes won't be large and it sounds as if now your accounts are over $10k you are going to file FBAR so won't have to worry about FBAR penalties.

Bottomline, see a professional and get this sorted out. You might want to sell the ISAs too.

Odo

Nun, thank you for your informed reply. I have contacted Pete Newton at britishexpatstax.com and look forward to hearing from him.

nun

Good move. Let us know what he advises, I'm an enthusiastic amateur so knowing what a professional recommends is always interesting. His take on the pensions and ISAs will be good to hear.