What a Big Four tax prep/ accounting firm advised us to do for FBAR/ FATCA
Oct 1st 2013, 9:12 pm
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What a Big Four tax prep/ accounting firm advised us to do for FBAR/ FATCA
Since the dreaded F-acronyms seem to be in vogue, it reminded me that I meant to tell you all what our tax prep people advised us regarding foreign accounts. This was for the preparation of 2012 taxes, as done by one of the Big 4 firms (provided as part of our relocation deal).
We had a number of bank accounts in the UK and Switzerland, both checking and savings, along with zombie pensions in the UK from when we lived and worked there pre-2008. The balance of the bank accounts alone made us liable for filing both FBAR and Form 8938 in 2012. The pensions are a mix of defined benefit 'final salary' and defined contribution 'money purchase'; some were funded purely via employment; a couple were set up as part of the UK government's 'opt out of SERPs' scheme in the 1990s and contain a mix of SERPs contributions and personal, voluntary funding. There have been no contributions to these pensions since 2008.
Form 8938: report all bank accounts and all pensions. It was perfectly acceptable to put 'not known' as the value of all the pensions, on the grounds that we couldn't reasonably be expected to calculate values given daily stock market fluctuations, the differing tax years and customer reporting formats, and the fact that final salary schemes don't have a value as such. We did offer to do our best guess based on the value of the previous annual statement, and what the stock market's done in the meantime, but were told that nah, 'not known/ $0' would be fine.
FBAR: report all bank accounts. That's it for our accounts. Definitely not the pensions - the key questions were 'did you take any distributions from it in 2012; do you have access to the money before a mandated retirement date' (no, and no); 'fine, in that case they don't need to be reported'. We queried this a LOT - after all, we had already given the tax preparers the relevant info for the tax return so it's not like it would've been hard to add it to the FBAR, but they were adamant that foreign pensions don't go on the FBAR.
This ties in with a document I found online from another similar firm, KPMG, which states:
"Although beyond the scope of this article, note that foreign financial accounts over which an individual has signature authority (and which are reportable on the FBAR) are not required to be reported on Form 8938, but the scope of foreign assets in which an individual has a reportable interest for purposes of Form 8938 is broader in comparison to the FBAR rules (e.g., interests in a foreign pension plan or foreign deferred compensation plan may be reportable on Form 8938)."
The last part clearly says that Form 8938 is broader in scope than FBAR and does include reporting of foreign pensions; ie, FBAR doesn't.
So this all suggests that neither the Treasury or the IRS actually gives a monkey's about our foreign pensions, the ones from our previous existences that we're not paying into, not getting a payment from, and can't get at until we're old. They must have realised that there's no realistic way such accounts can be used to defraud the US govt in any way, shape or form, and whilst they'd like us to give a list of them (probably for future income tax checking purposes once we start taking payments) they're of no interest right now.
The other useful thing I found out is that if you don't know the value of your pensions and put $0, then that $0 is used to calculate the 'do I need to file Form 8938 at all' maths. Without the pension values, I'll never have to file 8938 again. In fact, since pensions seem to be nothing to do with FBAR, I can keep the UK bank accounts under $10k and not have to worry about FBAR either!
We'll have some mopping up to do for 2013, where we still had some foreign money sloshing about so have to file FBAR but not Form 8938, and then we're done! All future finances will be kept state-side, and my life will be simple enough to do my own tax prep going forward.
*big sigh of relief*
Now, I expect someone (I'm looking at you, Nun
) will come along and tell me this is all wrong and that at some point the sky will fall in on our error. But it's what we were told to do, in writing, by a multinational accounting firm who double-checked it with their specialists in both the US and UK (we made them, and they confirmed in writing that this was their official advice), so I'm merely adding what I've found out into the knowledge pot. We (or hubby's firm, at least) have paid for X Firm to take the rap for us if they're wrong, but other people obviously have to make their own conclusions and decisions about their own circumstances, IANAL, etc.
We had a number of bank accounts in the UK and Switzerland, both checking and savings, along with zombie pensions in the UK from when we lived and worked there pre-2008. The balance of the bank accounts alone made us liable for filing both FBAR and Form 8938 in 2012. The pensions are a mix of defined benefit 'final salary' and defined contribution 'money purchase'; some were funded purely via employment; a couple were set up as part of the UK government's 'opt out of SERPs' scheme in the 1990s and contain a mix of SERPs contributions and personal, voluntary funding. There have been no contributions to these pensions since 2008.
Form 8938: report all bank accounts and all pensions. It was perfectly acceptable to put 'not known' as the value of all the pensions, on the grounds that we couldn't reasonably be expected to calculate values given daily stock market fluctuations, the differing tax years and customer reporting formats, and the fact that final salary schemes don't have a value as such. We did offer to do our best guess based on the value of the previous annual statement, and what the stock market's done in the meantime, but were told that nah, 'not known/ $0' would be fine.
FBAR: report all bank accounts. That's it for our accounts. Definitely not the pensions - the key questions were 'did you take any distributions from it in 2012; do you have access to the money before a mandated retirement date' (no, and no); 'fine, in that case they don't need to be reported'. We queried this a LOT - after all, we had already given the tax preparers the relevant info for the tax return so it's not like it would've been hard to add it to the FBAR, but they were adamant that foreign pensions don't go on the FBAR.
This ties in with a document I found online from another similar firm, KPMG, which states:
"Although beyond the scope of this article, note that foreign financial accounts over which an individual has signature authority (and which are reportable on the FBAR) are not required to be reported on Form 8938, but the scope of foreign assets in which an individual has a reportable interest for purposes of Form 8938 is broader in comparison to the FBAR rules (e.g., interests in a foreign pension plan or foreign deferred compensation plan may be reportable on Form 8938)."
The last part clearly says that Form 8938 is broader in scope than FBAR and does include reporting of foreign pensions; ie, FBAR doesn't.
So this all suggests that neither the Treasury or the IRS actually gives a monkey's about our foreign pensions, the ones from our previous existences that we're not paying into, not getting a payment from, and can't get at until we're old. They must have realised that there's no realistic way such accounts can be used to defraud the US govt in any way, shape or form, and whilst they'd like us to give a list of them (probably for future income tax checking purposes once we start taking payments) they're of no interest right now.
The other useful thing I found out is that if you don't know the value of your pensions and put $0, then that $0 is used to calculate the 'do I need to file Form 8938 at all' maths. Without the pension values, I'll never have to file 8938 again. In fact, since pensions seem to be nothing to do with FBAR, I can keep the UK bank accounts under $10k and not have to worry about FBAR either!
We'll have some mopping up to do for 2013, where we still had some foreign money sloshing about so have to file FBAR but not Form 8938, and then we're done! All future finances will be kept state-side, and my life will be simple enough to do my own tax prep going forward.
*big sigh of relief*
Now, I expect someone (I'm looking at you, Nun
) will come along and tell me this is all wrong and that at some point the sky will fall in on our error. But it's what we were told to do, in writing, by a multinational accounting firm who double-checked it with their specialists in both the US and UK (we made them, and they confirmed in writing that this was their official advice), so I'm merely adding what I've found out into the knowledge pot. We (or hubby's firm, at least) have paid for X Firm to take the rap for us if they're wrong, but other people obviously have to make their own conclusions and decisions about their own circumstances, IANAL, etc.
Last edited by kodokan; Oct 1st 2013 at 9:16 pm.
