Marcus bank refusing me as if I am US person

BlisteringBarnacles

I am UK resident, naturalized UK citizen. Wanted to open savings account with Marcus bank in UK.

Thanks to FATCA, many UK banks and financial institutions are refusing to deal with Americans in the UK. Looks like they have gotten so paranoid now that if you eat apple pie / celebrate Thanksgiving / watch NBA at home, they would suspect you to be American and refuse to deal with you.

Lived in the US a hundred years ago but never got a green card or US citizenship. Due to various reasons, I still have money in the US. I have filled out a W8-BEN but sometimes I have missed filing it in time. As per advice of my US tax accountant, I go ahead and file a US 1040-NR tax return. The key word here is “NR” meaning Non Resident.

Just because I file a US tax return, Marcus suspects me to be a US person and told me I cannot open a UK bank.

I would like to hear from UK nationals who lived in the US and who have things like old 401K, IRA etc. Even if you don’t have other US assets, when you pull money out of a IRA, you will need to file US tax return. Would UK financial institutions stop dealing with you then assuming to be a US national ?

BlisteringBarnacles

I had posted the same on bogleheads forum a few hours ago, and since I didnt see a reply, I thought I would ask the same here. But a Guru on that forum has just provided a great response that I am still digesting. So I pretty much have my answer there. Will thank the Guru on that forum, but just thought I would mention it here.

you can search online for : bogleheads unable to open marcus account

bostonerimus

If you have a 401k, IRA etc and are not a US citizen or resident there might still be a need to file a US tax return. It all depends on the treaty and the attitude of your 401k/IRA administrator. They will probably withhold a certain amount of tax, even if you claim zero withholding due to a treaty to cover their !!! with the IRS. In that case you have to get a refund and that requires a 1040-NR to be filed. So you'll need a SSN or a Tax ID number which might be confuse the UK banks into thinking you are a US person.

If you have a US DB pension or annuity it's a lot simpler and and you can usually avoid having to file US taxes. But an NR doesn't get the same tax free allowances as a US resident or citizen so it's best to file from a tax compliance standpoint to make sure you document your US and UK tax liabilities and credits. Just find a bank that doesn't have it's head up its !!! and when they ask if you are a US person or subject to FATCA just say NO.

bowlhead99

BlisteringBarnacles wrote: »

Just because I file a US tax return, Marcus suspects me to be a US person and told me I cannot open a UK bank.

As you saw on the other forum, the problem is that Marcus decided to phrase their question as whether you're required to file a US tax return rather than what they are required to consider for reporting which is whether you're a US citizen or tax resident.

As the meaning of tax 'resident' has to be interpreted in line with the US tax code it is broader than whether you're physically US resident and covers green card holders 'permanent residents' etc - and most people opening UK accounts are not going to be physically US resident, but may not really know the ins and outs of the US Code (and the form is too short to reprint the whole US tax code to help them out), they have taken a shortcut which is to ask if you do a US tax return - as people such as (e.g.) green card holders temporarily in the UK would do.

It is easier for them to have a high level onboarding rule that causes them to reject a one off customer who might have legitimately been able to not be reported to IRS, than deal with a bunch of people who might have US indicators that they need to 'cure' through documentation. If they can avoid the compliance obligations altogether by having a blanket rule that rejects potentially-US customers, framing themselves as a bank with only local/ definitely non-US customer accounts, that'll save some money and lead to higher rates and/or more profits.

I would like to hear from UK nationals who lived in the US and who have things like old 401K, IRA etc. Even if you don’t have other US assets, when you pull money out of a IRA, you will need to file US tax return. Would UK financial institutions stop dealing with you then assuming to be a US national ?

No UK financial institution knows that I have a US account or investment product or US income or do/don't file a US resident or non-resident tax return, unless I tell them.

As a tax nonresident of the US, I'm not required to tell IRS about my non US cash, investment income or other assets, so it would not seem to frustrate the purpose of FATCA if my bank also didn't tell the IRS that I had thousands of pounds in a UK account.

That said, the question will typically not come up, as generally the account opening forms for UK financial institutions ask straight questions about tax residence and US citizenship rather than blurring the lines and asking about tax returns.

Sometimes, guidance notes to account forms try to give 'helpful' pointers around the tax residence question, and (e.g.) remind you that you may be considered resident of more than one country and that you should list all the countries where you're considered resident, for example the places where you file tax returns. But that 'for example' isn't definitive and if I was filling out a NON resident form to declare some property income or dividend income or employment income from another country, I wouldn't say I was tax resident there.

sal_III

Goldman Sachs have likely made a cost/benefit analysis, pointing that the cost of investing in compliance team/procedures to review if someone who has to file US tax return, needs reporting to the IRS and the mountain of paperwork involved, far outweighs the benefit of having the hand full of these customers cash.

As already pointed out, other UK financial institution will be happy to deal with you, as they have likely already invested in processes to deal with customers in your situation.

Blame the IRS for all the ridiculous reporting they require.

EthicsGradient

I am a UK citizen, and only a UK citizen. I have been resident in the UK for all of my life, except for 2 years when I worked at a US site of my (American) employer. So I paid US taxes for 2 years, over 20 years ago (and have not had any money in the USA for those 20 years, nor had to file a return for those 20 years). When I applied to Marcus some months ago, it asked "have you ever paid US taxes?", so I phoned them up and asked "surely this doesn't apply to me?", and they said yes, it does, and they wouldn't open an account for me.

SonOf

Thanks to FATCA, many UK banks and financial institutions are refusing to deal with Americans in the UK. Looks like they have gotten so paranoid now that if you eat apple pie / celebrate Thanksgiving / watch NBA at home, they would suspect you to be American and refuse to deal with you.

FATCA is one key reason. Another reason before FATCA was that US citizens can use the American courts to sue overseas firms. And given the litigious culture of Americans, a lot of firms over here would not accept US citizens even before FATCA.

Citizenship is usually the problem. Not residency. However, some firms will make their own decisions based on their own risk analysis. In this case, it may well be that they have decided that turning away a small handful of accounts is worth it for not having the business risk.

BlisteringBarnacles

Thanks for the great explanations, all ! much appreciated.


Yes, I was trying to answer the questions as truthfully as possible, which is what I guess one is supposed to do when it comes to questions about taxes, residency, etc. After all, I dont want to get into any trouble.

While it is fairly obvious to us that FATCA doesnt apply to Non resident aliens (NRAs), this simple fact seems to have escaped the finest minds at Goldman (Marcus). I read somewhere that there is a saying in Wall Street that Goldman hires the brightest. In this case, that certainly doesnt seem to be so. But then, I am also yet to find any clear note officially on IRS website that says "FATCA is NOT applicable to NRAs".

Anyway, by making this definition of "US person" as broad as possible, Marcus are the ones losing out. I work for the UK offices of an American company. All of my UK colleagues get a small amount of stock options (Nasdaq stock) issued from our US office. So we all have to file W8-BEN forms. As per Marcus that would make all of us "American". There are a ton of US companies with large UK offices, especially tech and finance companies. US firms also pay better than pure UK firms, generally speaking. Many of the UK employees of such companies are well paid, and likely to have some "connection" to the US, perhaps involving occasional / frequent travel to the US. Casting the net wide and banning all of these people from becoming potential customers is a stupid thing to do on the part of Marcus bank. I also know of a few British folks who simply hold American shares (Apple, Google etc) thru a brokerage account and they file W8-BEN. Are they also "US persons" now ?

My biggest fear is what if other UK based companies (banks, finance institutions) start doing the same out of fear of IRS ? There is after-all a herd mentality in the finance world. What if Hargreaves, Interactive Investor, Charles Stanley, Selftrade start doing the same ? Where will we go ? At least in my case the fault is partly mine. I still have taxable money in the US and file W8-BEN etc. (long story I wont get into now why I keep taxable money in the US). But what about various others who only have old 401k/IRA in the US that they cannot easily move to the UK ? At some point they may do a Roth Conversion and will need to file 1040-NR as an NRA. If they are now treated as "US persons" , what is the way out ? What about the poster above (EthicsGradient) who had one "link" to the US 20 years ago ? We cannot erase our past. Where do we go ? This is scary, if we become financially "homeless".

I just hope it doesnt come to that.

Cheers

bowlhead99

You seem to be a bit OTT here. A W-8BEN is literally the form you use to tell the stockbroker, withholding agent or intermediary for US assets / US source income that you are *NOT* US-resident or citizen and are instead resident in another country. If that country's the UK, properly completing the form will allow you to have a lower rate of withholding tax on US source income due to the existence of the UK-US tax treaty.

Also you do not 'file a W8BEN' with any tax authority. It is not a 'tax filing' like a tax return. It is a self-certification of your tax status, primarily for withholding purposes, and it never goes to the IRS, it only goes into the records of the person (e.g. broker or investee company or bank) who is likely to be handling and withholding (or reporting) on your US source income.

So I don't get your comment that British UK resident folks who hold American shares through brokerage accounts (there are hundreds of thousands of them), or your UK colleagues working for American firm, would be 'considered American' as per Marcus. Filling out the form swears under penalty of perjury that you are *NOT* a US resident or citizen. If you were a US citizen or US resident alien you would complete W9, not W8. Certainly if Marcus or any of the other firms you mentioned asked 'do you file US tax returns', and the only US related thing you filled out was a W8 form, you would not need to say yes, because a W8 is not any kind of tax return, it is a statement of your status.

Similarly, HL, II, Charles Stanley, Selftrade, AJ Bell etc, who are all currently happy to have UK resident non-Americans as customers, investing into US markets, are not going to start saying that if you have filled out a W8 to declare to a financial intermediary under penalty of perjury that you are *not* US resident or citizen, you must be a US tax filer and therefore they don't want the business. That wouldn't make any sense at all.

BlisteringBarnacles

bowlhead99, thanks for explaining W8-BEN in so much detail and correcting me on this. Yes, I was overreacting when it comes to W8-BEN.

However, I guess some of my other concerns are still valid. Because of globalization and the close business ties between US and UK, that must be many British folks who may work abroad in US. I work for a small tech company and I know several UK employees who have taken up assignments all over the world.

So if other UK banks and financial institutions start treating us as "US persons" just because we worked in USA long time ago, as in the case of EthicsGradient above, then we could be in trouble.

BlisteringBarnacles

So let us consider UK residents who hold American shares through brokerage accounts - let us assume they never went to the US on long term stays, work etc. Let us say they file a W8-BEN. Question : Will the brokerage firm send them a 1099 or 1042-S at all ?

My Etrade account (opened during my US days) still sends me a 1042-S every year, even tho I have been UK resident for more than a decade and I dont have a green card or US citizenship. I was curious to know if everyone gets a 1042-S.

My US tax accountant says that "the 1042-S issued by my US brokerage accounts are shared with the IRS. This means the IRS is getting at least some of my taxable income information and is therefore waiting for your tax return. So, I must either file US tax returns or respond to their letters every year. AND, a “US Person” is any person who files or is required to file a US tax return."

is my US tax accountant correct ? if so then everyone who gets 1042-S can end up as "US person".

I do not want to be a "US person". if I file my W8-BEN on time and my only income in US is stock dividends and bank interest, can I stop filing US tax returns ?

bowlhead99 : I hope you are seeing this. Would love to hear from you. Cheers