# non resident filing jointly and FBAR



## mikey_2017 (Mar 25, 2017)

hello,
a friend of mine who is a us citizen got married to a french citizen but she hasnt moved into the US yet 'still waiting for green card by nxt year'...he is filing as joint with her, and using also form 2555 'Foreign Earned Income' for her....
my question does she need to do the FBAR stuff since she is not US resident yet but her husband will be filing jointly?


----------



## Bevdeforges (Nov 16, 2007)

No, she doesn't need to file FBAR until she has her "green card" in hand.


----------



## JustLurking (Mar 25, 2015)

No FBAR for non-resident aliens, but as ever the IRS has an unpleasant surprise gimmick in its back pocket and ready for deployment when you least expect it. In this case, a possible requirement to file FBAR's evil twin, FATCA form 8938.

From form instructions:


> *Who Must File*
> Unless an exception applies, you must file Form 8938 if you are a specified person (see Specified Person, later) that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold.
> ...
> *Specified Person*
> ...


----------



## Bevdeforges (Nov 16, 2007)

JustLurking said:


> No FBAR for non-resident aliens, but as ever the IRS has an unpleasant surprise gimmick in its back pocket and ready for deployment when you least expect it. In this case, a possible requirement to file FBAR's evil twin, FATCA form 8938.
> 
> From form instructions:


Since you raise the issue of form 8938, the other little complication is that there are different filing thresholds that apply based on whether the filers are resident in the US or outside the US. 

For US resident filers, the threshold is $50,000, whereas for those resident outside the US, the threshold is $200,000. On a joint return where only one member of the couple is US resident, I suspect the lower threshold would apply. (However, if the US resident filed separately rather than jointly, that would eliminate the need to report any of the non-US resident's foreign assets.) OTOH, given that the non-resident spouse isn't required to file an FBAR it's highly unlikely the IRS would have a clue about her foreign assets, either.


----------



## mikey_2017 (Mar 25, 2017)

Thanks guys for the responses, but doesn't the fact they are filing jointly means that they will both be treated as residents & therefore all the FBAR-FATCA requirements will apply to her?


----------



## mikey_2017 (Mar 25, 2017)

also from an immigration perspective she is not resident yet!


----------



## Bevdeforges (Nov 16, 2007)

mikey_2017 said:


> Thanks guys for the responses, but doesn't the fact they are filing jointly means that they will both be treated as residents & therefore all the FBAR-FATCA requirements will apply to her?


For tax purposes, yes, she will be treated as resident for the full year. However, the FBAR is something apart. AND there is the little matter of the IRS not really having any way of knowing about foreign accounts if she hasn't been asked by her financial institutions about filing a W-8BEN or similar document.

Once she becomes resident and gets her actual US SSN, then she will have to file an FBAR in her own name. But there is enough ambiguity in the various laws that, until that time, it shouldn't really be a problem.


----------



## JustLurking (Mar 25, 2015)

Bevdeforges said:


> For tax purposes, yes, she will be treated as resident for the full year. However, the FBAR is something apart. ... But there is enough ambiguity in the various laws that, until that time, it shouldn't really be a problem.


Pretty much, though it's not so much ambiguity as simply a difference in the laws' intents and purposes.

FATCA is a _tax_ law, and so once a non-resident alien 'elects' to be treated as a US person for tax purposes, all of FATCA applies.

FBAR is a _money laundering_ law, and is not connected to tax. (Well, except that FinCEN noticed some years ago that a filed FBAR form was entirely worthless -- only unfiled ones have any value! -- and so cunningly palmed off the workload onto the IRS, an organisation already well set up to handle masses of paperwork of little no value whatsoever anyway). Not in scope for a non-resident alien 'electing' to be a US person for _tax_ purposes, then.

Of course, this nonsensical duplication of reporting, both FBAR and FATCA, is repeatedly noted by TAS as unnecessary, confusing and time-wasting for all. And of course, the IRS just as repeatedly fails to do anything to tidy up the situation.


----------



## JustLurking (Mar 25, 2015)

... also, I meant to mention above that 'married filing separately' when the spouse is a non-resident alien is probably fairly uncommon, so your friend might want to check closely that this is indeed the best option for them both.

Roping a non-resident alien into full US tax might not be horrible where the FEIE excludes earnings, but there are other areas where it could be very damaging.

Aside from FATCA reporting, already covered, if the non-resident alien spouse owns any non-US domiciled mutual funds or ETFs (highly likely as EU regulations now effectively prevent EU residents from buying US domiciled ones), these come in for truly horrible US tax treatment -- google 'PFIC' for more. A French _Assurance Vie_ plan offers no protection from this ghastly US tax treatment, either. And all investment and other gains taken in the year also become US taxable, sometimes even those inside pension wrappers. It may even include some of the capital gain from selling a personal residence, even (especially!) where the bulk or all of the gain accrued long before the tax year in question, and when the person involved had no connection whatsoever to the US.

Even for US citizens and residents, US tax law is unpleasant and complex. For US non-resident aliens who are unfortunate enough to have to tangle with it, it is baroque, grotesque, and sometimes just flat-out confiscatory.


----------



## Bevdeforges (Nov 16, 2007)

Have you made a typo there? Married filing separately is a very common filing status where one spouse is a non-resident alien. Allows all the "fancy" foreign investments to be in the NRA's name and thus outside the scope of IRS filings. I think you may have meant to write "married filing jointly" - because I'm not aware of any EU regulations that prevent EU residents from buying US domiciled investment assets. 

Here in France, we have to report bank or assurance vie accounts opened, closed or used outside of France, but the reporting is far less onerous than the FBAR filings. (No balance information is required.)

Once the EU national spouse becomes a resident alien in the US, they're subject to full IRS regulations and filings.


----------



## JustLurking (Mar 25, 2015)

Bevdeforges said:


> Have you made a typo there? Married filing separately is a very common filing status where one spouse is a non-resident alien. ...


Oops, yes. Of course, I meant 'married filing jointly' would be rare. 'Married filing separately' is the norm. Thank you for catching this. Far too late to fix my prior post, unfortunately.



Bevdeforges said:


> ... I'm not aware of any EU regulations that prevent EU residents from buying US domiciled investment assets.


The problem regulation is PRIIPs, effective from the start of this year.

It doesn't _directly_ prevent EU residents from buying US domiciled ETFs, but it does _indirectly_. Brokers cannot now offer ETFs for sale to EU residents unless they come with a 'Key Information Document' in a prescribed format. UCITS ETFs are okay, but US domiciled ones generally do not provide the required information, and since few if any of them apparently intend to in future, the end result is a sort-of de facto ban on US domiciled ETF availability in Europe.

For most EU investors this will be largely a non-event. For US citizens living in Europe though, these ETFs were one of the very few ways to thread the needle of horrible US PFIC tax rules. Now that avenue is closed off, US tax law is making it even more difficult than it was before for these people to do what are after all pretty ordinary things, for example saving for retirement.


----------

