# Should I file delinquet FBAR? And what to do with accounts in the US?



## MJ2014

Forgive me for asking questions which have probably been asked already, but I can't find the specific answers to!

1. I am a US citizen residing and working in the UK since mid 2016. I didn't even know what an FBAR was until 2019 and so filed delinquent FBARs for 2017-2019. Other things consumed my life last year and I again forgot to file an FBAR for 2020. Should I file a delinquent one? At one point, my checking account did have >$10,000 because I had my house deposit saved. Am I going to penalized for filing late? I haven't been penalized for the previous late filed FBARs and just chose the 'I didn't know I had to file' for my reason, but I am afraid of incurring penalties now because I did know, but forgot this time! As for FATCA, isn't this something I am supposed to receive from the bank, or do I have to go and file that myself? I received one from my bank once but don't recall receiving it annually.

2. I have most of my accumulated wealth in US based mutual funds and stocks, one traditional IRA, and one SIMPLE IRA, all of which I had before moving to the UK. I also still have a US checking account with a large bank. Thus far, I have basically just kept all the money where it is and reported any investment income or money withdrawn when I file my US taxes. I use a family members' address for all these accounts. I was under the impression I could still keep all these accounts using a family members' address but that it is 'questionable' to make further contributions to them while I live abroad. For clarity, I am not withdrawing from any retirement accounts yet. Can I transfer money using services like TransferWise to my US bank account and contribute money to the traditional IRA or mutual funds I have in the US if I want to, or is this not legal in some way? Should I be reporting these accounts to the UK? (I wouldn't even know how)

3. I have a UK employer sponsored pension plan since 2018 (I think?). From what I can tell, the contributions to this are not treated as income for the FEIE and it is not treated as a PFIC. Do I need to report this pension/retirement account on the FBAR? I don't think I did on the previous FBARs - so if I am supposed to be reporting this, do I then need to go back and amend the previous years?

4. My spouse is a UK citizen, that has thus far remained completely outside the US tax system. We may decide to move back to the US in the future and I have read I need to demonstrate 5 years' tax compliance for him to get a green card. I have filed every year using turbo tax to the best of my ability, though I'm sure I have made mistakes because of ignorance in addition to probably not filing FBARs correctly. Is this something that is likely to affect my spouse's ability to get a green card if we move back to the US?

If you read this far, thank you!! This forum has been really valuable for me - with help from here I recently had my indefinite leave to remain approved in the UK! Now I have that out of the way I am trying to sort out my finances....


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## Bevdeforges

OK - someone will be along shortly with more details on the answers, but to try to allay your concerns I'll try to answer your questions briefly.

1. Net-net there is little or no follow-up on FBAR filings, especially for folks who live overseas so unless you're moving hundreds of thousands of $$ through your overseas bank accounts I wouldn't worry about missing a year or two of reporting. (And heck, you could always claim the pandemic as the reason you were filing the 2020 FBAR late. It's more or less the truth - and at this point there is no penalty for late filing an FBAR.)

FATCA generally refers to the banks' requirements regarding the reporting of "US persons'" accounts overseas, though there are some "FATCA forms" to be filed with your annual tax forms if you have certain types of investments held overseas.

2. Simplest thing is to leave your money in the US - particularly the deferred tax retirement accounts (IRA, 401K, etc.). Those, you just continue to report for US tax purposes however you've been doing it - and it doesn't matter what address you're using for the accounts as long as your "mail drop" person relays the necessary 1099s to you at the end of the year. However, you aren't allowed to make further contributions to your IRA unless you have "earned income" to report on your US taxes - meaning you aren't taking the FEIE against your salary income. (And before you ask, no you can't take the FEIE against only a portion of your salary in order to have something left over to contribute to your IRA.)

3. If you haven't been reporting your UK pension on your FBARs, I wouldn't bother starting now. Certain pension funds are considered "investments" by the IRS, but the criteria can be difficult to sort out. Unless you have been asked by the fund to provide your US social security number, I would assume that your pension is NOT considered a reportable account. If that changes in the future, you can start reporting the balance at that time with the legit excuse that you thought it was a pension, not an investment.

4. If you have been filing your income tax returns, then you have no problem in proving you have complied with the filing requirement over the last 5 years. If the IRS has any problems with your returns, they'll be in touch (don't hold your breath - they don't really do much with returns coming in from overseas). If they haven't contacted you by the time you apply for your wife's visa, then they are happy with what you've filed.


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## MJ2014

Thank you Bevdeforges!! That all makes sense - I think I will continue to carry on as is. I went ahead and filed the late FBAR from last year just to be consistent about it. 
I guess instead of contributing to my traditional IRA I will just increase contributions to my workplace pension here which will hopefully achieve the same goal in the end!

Thank you again, it is a huge help!


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## Moulard

On point 1 the delinquent process for FBARS is to just file them and add a reason why they are late. You can do this so long as you have not been contacted by the IRS about them, or are not in an audit. 

I quibble with Bev on point 3. It doesn't have to be an investment for it to be reportable. The filing requirement is for financial accounts in which you have a financial interest or signatory authority. You clearly have a financial interest in it, but it is valid to ask the question "Is a financial account?". I don't really know enough about UK pension schemes to comment, but if you can make personal contributions to it, it is probably a financial account. If it has a cash surrender value.. it is probably a financial account. If you are just the beneficiary of funds held by the pension trust.... it may well not be a financial account.

I believe that it would most likely be reportable on Form 8938 so long as it was not "an interest in a social security, social insurance, or other similar program of a foreign government” - but that is an answer to an unasked question.

On Point 4. In the old days all that was required was to attach copies of your tax returns to the application. I gather too many people created tax returns that hadn't actually been filed, so these days you have to submit an IRS transcript of your returns. Fundamentally this is not about tax compliance, but determining whether or not your income is sufficient to meet sponsorship requirements. But you do need to submit returns even if you didn't have a filing requirement.


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## MJ2014

Okay, I thought I was doing things right, but the more I read from different sites the more confused and stressed I get. 

It says in the IRS website that you don’t need to report accounts on FBARs that are ‘held in a retirement plan of which you’re a beneficiary of’. Based on this, I did not report my company pension account because this is clearly a retirement account. Why do I feel like I am misinterpreting this?

I have also read that some companies, T Rowe Price included, where I have almost all my accumulated wealth that I am depending on to use as income in the future, will close your account if they find out you’re residing abroad? (Even though I use a family members’ address in the US). Do they track where you log onto your account from? I log on all the time while I’m in the UK...I couldn’t take the huge capital gains tax hit that would result if they decided to close my account and just mail me a check.

I am aiming to be semi retired early, perhaps in 5-10 years’ time, and I planned to use the income from these investment accounts in the US ... can I withdraw money from my US taxable vanguard and T Rowe Price accounts, report it as usual for US taxes, and have it sent to my US bank account, then transfer it to my UK account with Transferwise or a similar company that would offer a better exchange rate than the bank?

I read so many ‘FIRE’ / early retirement blogs that all talk about retiring abroad if you want, but I never see specific details about how they actually withdraw this money when abroad and get it to their bank account in their local country? Is this plan viable, acknowledging there will always be exchange rates to considerIs there a better way to do this? I plan to aggressively save in my US vanguard taxable account in index funds by just sending my savings in British pounds to my US bank account and then putting it into Vanguard.

I think I will be in the UK at least semi long term, but I can’t invest here because it would be a PFIC and I just should not go there!


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## Bevdeforges

MJ2014 said:


> I have also read that some companies, T Rowe Price included, where I have almost all my accumulated wealth that I am depending on to use as income in the future, will close your account if they find out you’re residing abroad?


This has been a trend over time. Not all companies are doing it (yet?) and not all offices of all companies are doing it. It does seem to depend on your situation - whether you are already retired or not (and thus withdrawing funds rather than adding to your fund), whether you have notified them of your foreign address, the amounts in your account and how "active" the account is. 


MJ2014 said:


> can I withdraw money from my US taxable vanguard and T Rowe Price accounts, report it as usual for US taxes, and have it sent to my US bank account, then transfer it to my UK account with Transferwise or a similar company that would offer a better exchange rate than the bank?


Basically yes, this is pretty much what you should plan on doing. You can even open one of those Wise "borderless accounts" and set up your withdrawals to be transferred directly to the Wise account (in US dollars to the US account number details they'll give you) and then exchange the funds to your UK bank account. There is a preferable rate for funding your exchange transfers from your Wise account that makes it an even better deal than having Wise collect the US$ from your US bank account.


MJ2014 said:


> I read so many ‘FIRE’ / early retirement blogs that all talk about retiring abroad if you want, but I never see specific details about how they actually withdraw this money when abroad and get it to their bank account in their local country?


The "trick" to this is that the situation has been changing over the last 10 to 15 years. What worked a few years back doesn't work now and some financial institutions are only just starting to take a hard look at those with "foreign" addresses and residences so everyone's experiences have been different depending on their situations.


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## MJ2014

Thanks again, Bev, good to know about the borderless type account- I will look into this!

Its so hard to plan financially for the future when you don’t know what the companies holding your accounts will do. Or for that matter if some ignorant mistake I’ve made reporting my foreign pension will get my US assets frozen by the IRS! I haven’t notified vanguard/TRP of my foreign address, as it’s possible we could move back to the US in the future, and I don’t want the accounts closed. I am trying to distribute the money more evenly between Vanguard and T Rowe price, I guess in case one ends up treating things more favourably (fingers crossed) if they do decide to take action on it. 

I have also considered trying to buy a cheap property in the US in the future and maybe living there part time to avoid being classed as a foreign resident completely?


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