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Old 04-20-2012, 06:26 AM   #61
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Not retired yet - but it will all be US based funding. Small (microscopically small) pension, SS, taxable accounts, and IRA/401ks.

It's probably not going to happen, because we don't want to give up our home here... and maintaining a second home (either rental or purchase) hits the budget too hard. But we've got my husband's cousins clamoring for us to repatriate to Sicily. LOL. And they make great food and offer us great wine - so it's enticing.

If we do go - it might just be extended visits. Summer breaks for example (school age kids).
The UK/Italy treaty deals with pensions thoroughly. Gains in US accounts will not be taxed in Italy or obviously the US. If you are a US citizen, resident in Italy and not an Italian citizen income from US retirement accounts and SS will be taxed in both US and Italy, but Article 23 will save you from "double taxation".
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Old 04-20-2012, 10:39 AM   #62
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I hope you are right. According to this article, they make it sound like you could be in big trouble just for filing these forms incorrectly.
The info for the forms suggests very large penalties could be applied if the forms are completed incorrectly, but we won't know how the IRS will apply those rules untill the tax filing season is over (June 2012 for expats) and the forms are submitted and reviewed. Many expats subject to form 8938 are delaying filing until as late as possible in hopes that clearer instructions will somehow become available.

The reason I suggested "a basic checking and savings account" is the filing of the information for both these types of accounts is really rather straightforward on both FBAR and FATCA 8938. But yes, you could still make an innocent mistake.

It's the financial accounts beyond the basics that become a problem. The first are the tidly bits, the travel cards (a result of having to declare prepaid credit cards), and the proceeds from the bake sale (a result of reporting accounts that you have 'signature authority' over).

Having signature authority has already resulted in US expats in accountancy postions in foreign companies to be removed. Although they have no control over the the vast financials of the company, they may have the authority to write checks to suppliers, for example, in the companies name. In previous years, if they remained in that postition, they would have to report the full company assets on their FBAR. This is the rule that changed for 2011. They may now keep those positions and not have to report the company assets if they meet certain conditions.

'Other foreign assets' is the section of 8938 that is causing the most concern. To understand this section, you must fully comprehend the IRS (Code) definitions of PFICs, entities, issuers, counterparties, foreign trusts, etc.

To bring this thread back to it's original title, there have been two recent announcements on a US expat website in the UK. In the last month, one of the regulars has stated they are initiating renouncing their US citizenship, and will keep the others posted as to how it proceeds. They've had enough. Others (similar to members of this site) are posting requests for information and experiences on the process, for the same reason. In the last week, a newer member (a USC married to a dual USC/UKC) has been denied opening a bank account with one of the major UK banks. The reason: they are *********. (... Americans! SShhhh, don't let knowledge of their 'social citizenship disease' get around).
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Old 04-20-2012, 10:55 AM   #63
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The info for the forms suggests very large penalties could be applied if the forms are completed incorrectly, but we won't know how the IRS will apply those rules untill the tax filing season is over (June 2012 for expats) and the forms are submitted and reviewed. Many expats subject to form 8938 are delaying filing until as late as possible in hopes that clearer instructions will somehow become available.
US tax authorities do not have a history of severe penalty or punishment for innocent errors. It will likely take much more time (>2 years) to see if this is the exception or not, as neither the IRS not the US Treasury have the staffs to deal with the volume or the unexpected consequences.

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To bring this thread back to it's original title, there have been two recent announcements on a US expat website in the UK. In the last month, one of the regulars has stated they are initiating renouncing their US citizenship, and will keep the others posted as to how it proceeds. They've had enough. Others (similar to members of this site) are posting requests for information and experiences on the process, for the same reason. In the last week, a newer member (a USC married to a dual USC/UKC) has been denied opening a bank account with one of the major UK banks. The reason: they are *********.
In Spanish they say "Las palabras se las lleva el viento". Roughly, talk is cheap.

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(... Americans! SShhhh, don't let knowledge of their 'social citizenship disease' get around).
??
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Old 04-20-2012, 10:56 AM   #64
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In the last week, a newer member (a USC married to a dual USC/UKC) has been denied opening a bank account with one of the major UK banks. The reason: they are *********. (... Americans! SShhhh, don't let knowledge of their 'social citizenship disease' get around).
OAP, which site is that? uk-yankee?

I'm afraid of being refused a UK bank account when I return to the UK, or of having to pay extra fees just to get basic service.

If that happens I'll probably renounce US citizenship. I could then get rid of the 1040 requirement. As most of my money is in US retirement accounts I'd just have to file a W8-BEN, my SS would not be US taxable and I could move my taxable money to the UK and invest in UK mutual funds.
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Old 04-20-2012, 11:20 AM   #65
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Yes. It's the post from Vadio in the "Yahoo article about Expats, taxes, and renouncing US citizenship". I've had a PM from Vadio which names the bank and the account (a standard account in the UK).
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Old 04-20-2012, 11:33 AM   #66
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Nun, if you were to return to the UK and renounce US citizenship, would you be able to keep your US investments? I believe a UK citizen cannot use Vanguard (US), for example, though perhaps an existing customer may be able to keep an account by some means.
There appear to be several issues here -
1) US citizens moving overseas and having problems with financial instruments and reporting - potentially resolved by only using simple accounts in the foreign country and keeping investments in US where they can be understood by the IRS
2) US citizens connected to foreigners with the result that they must try to report on foreign assets that are alien to the IRS e.g. UK ISAs and PEPs. Unless their partner is willing to reveal all and liquidate everything not easily understood by the IRS and re-invest in other instruments, these people have a major problem as described in the original article.
3) Non-US citizens who reside in US with foreign assets and who do not quickly liquidate all foreign investments and re-invest in items understood by the IRS.
Since many of these foreign investments carry special local tax treatment, selling is not an option if the move overseas or to the US is not permanent. This does not appear to be appreciated by the IRS (or certain posters). It seems to be an attitude of do it our way or not at all - which may not be in the best long term interests of the US, discouraging talented people from coming here and others to renounce their connection as they leave.
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Old 04-20-2012, 11:33 AM   #67
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Yes. It's the post from Vadio in the "Yahoo article about Expats, taxes, and renouncing US citizenship". I've had a PM from Vadio which names the bank and the account (a standard account in the UK).
Interesting, but I thought Vadio was refused a "higher yielding account" not a basic bank account, so the issues might be more to do with foreign trusts and PFIC.

UK banks may not like US citizens as customers, but they are ok with them as CEOs

Barclays chief Bob Diamond links part of bonus to improved performance | Business | The Guardian
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Old 04-20-2012, 11:44 AM   #68
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The point has already been made here that one key difference between US tax administration and other countries is the taxation of US citizens worldwide. Another key difference, and one which creates huge issues with reporting to the IRS, is the calculation of taxable profits and losses within a fund even if the shares of the funds are not traded. In other countries only realised gains and losses are reportable/taxable therefore investment companies do not produce the data (equivalent to 1099) that is demanded by the IRS.
This taxation of unrealised gains and losses is one of the elements of the US system that appears to be huge waste of administrative effort.
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Old 04-20-2012, 11:46 AM   #69
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US tax authorities do not have a history of severe penalty or punishment for innocent errors.
I would refer you to the response from Nina Olsen, National Taxpayer Advocate, in her report to Congress issued on December 31st, 2011, on the "Bait and Switch" IRS tactics, starting on page 206.

http://www.irs.gov/pub/irs-utl/2011_...tionalmsps.pdf


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Old 04-20-2012, 11:48 AM   #70
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I would refer you to the response from Nina Olsen, National Taxpayer Advocate, in her report to Congress issued on December 31st, 2011, on the "Bait and Switch" IRS tactics, starting on page 206.

http://www.irs.gov/pub/irs-utl/2011_...tionalmsps.pdf


Instead of proving a link and a tease, why not a short summary that would benefit other thread readers.
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Old 04-20-2012, 11:50 AM   #71
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The point has already been made here that one key difference between US tax administration and other countries is the taxation of US citizens worldwide. Another key difference, and one which creates huge issues with reporting to the IRS, is the calculation of taxable profits and losses within a fund even if the shares of the funds are not traded. In other countries only realised gains and losses are reportable/taxable therefore investment companies do not produce the data (equivalent to 1099) that is demanded by the IRS.
This taxation of unrealised gains and losses is one of the elements of the US system that appears to be huge waste of administrative effort.
The US does not tax unrealized gains of mutual funds. It does require mutual funds with realized gains to distribute them and then taxes those as income.
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Old 04-20-2012, 11:52 AM   #72
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The US does not tax unrealized gains of mutual funds. It does require mutual funds with realized gains to distribute them and then taxes those as income.

Technicality. You are completely ignoring the point.
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Old 04-20-2012, 11:53 AM   #73
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Instead of proving a link and a tease, why not a short summary that would benefit other thread readers.

This sort of response is not helpful. Readers of the thread will be well aware of the point being made.
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Old 04-20-2012, 11:59 AM   #74
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UK banks may not like US citizens as customers, but they are ok with them as CEOs.
The problem with the renumeration package for Diamond was in part due to his US tax situation. (7th paragraph down in the following article.)

Barclays pay row lifts the lid on bank's closed culture - Telegraph
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Old 04-20-2012, 12:10 PM   #75
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This sort of response is not helpful. Readers of the thread will be well aware of the point being made.
Not really. The post appears to disagree with a comment of mine, but instead of indicating why it only links to an external document that may or not be related. A brief summary would inform the casual readers and also give those interested enough information to know whether they should pursue the link or not.
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Old 04-20-2012, 12:13 PM   #76
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Technicality. You are completely ignoring the point.
With all the hyperbole and rhetoric I thought this "technicality" would be helpful, especially to uninformed readers.
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Old 04-20-2012, 12:31 PM   #77
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With all the hyperbole and rhetoric I thought this "technicality" would be helpful, especially to uninformed readers.

By the time readers get to this point in the thread they are informed.
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Old 04-20-2012, 12:33 PM   #78
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I'm afraid of being refused a UK bank account when I return to the UK, or of having to pay extra fees just to get basic service.
You shouldn't have a problem since you will be a UK citizen residing in the UK with a UK address. You will also, presumably, have your National Insurance number. (if you've lost it there is a UK gov site where you can enter some personal details and they'll tell you what it is - we did that for DW a couple of years ago).

We have a checking and a savings account in the UK with a US address. Not having a UK address does exclude us from holding anything other than a basic checking and savings account. (we had the accounts before we left the UK).
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Old 04-20-2012, 12:45 PM   #79
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Nun, if you were to return to the UK and renounce US citizenship, would you be able to keep your US investments? I believe a UK citizen cannot use Vanguard (US), for example, though perhaps an existing customer may be able to keep an account by some means.
Vanguard will service existing accounts owned by US non-resident aliens, but they won't open one if you have a foreign address, even if you are a US citizen.

However, I've been reading the 8854 IRS expatriation form and Part V 7a is a kick in the teeth as it says
Quote:
7a Do you have any eligible deferred compensation items? Checking the “Yes” box is an irrevocable waiver of any right to claim any reduction in withholding for such eligible deferred compensation item under any
treaty with the United States . . . . . . . . . . . . . Yes No
So I assume eligible deferred compensation is retirement funds and if I waive the US/UK tax treaty exemption I end up as a non-resident alien without the advantages of the tax treaty and I they'll be 30% withholding on income from my retirement accounts and I'll have to file a 1040 to claim the tax back.....

So now I won't be giving up US citizenship as I'd loose the cover of the tax treaty and have a more complex situation. The bigger issue would seem to be for Green Card holders who have US retirement accounts and expatriate. If they do this they give up all treaty rights as far as the US goes.
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Old 04-20-2012, 12:46 PM   #80
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By the time readers get to this point in the thread they are informed.
Experience has shown that many people do not read all the posts, just the last few, and some not even that, and when they post, it is sometimes out of context. The issue of mutual fund taxation was not part of the original thread. If you want to introduce it, fine, but in that case it would be helpful to make sure it is "technically" defined correctly.
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