EXPAT - Pension help needed!

24

Comments

  • spodrod1
    spodrod1 Posts: 15 Forumite
    EdSwippet wrote: »
    Well, maybe. I thought that way too, while working in the US. However, US tax laws change regularly -- on average daily, with more than 300 tax law changes each year! -- and each change that affects NRAs is unfailingly detrimental.

    The only reason I still have my IRA intact is because I left the US before the 'exit tax' law passed in 2008. Had I stayed, it would have stripped me of more than a third of my IRA on the day I left and turned in the green card. And not just this, but that loss would have been true 'double tax' -- there is no UK tax credit for the US exit tax because it contravenes the US/UK tax treaty.

    Admittedly this is an issue only for former long-term green card holders or ex-US citizens who pass certain asset limit tests, but nevertheless it is a good example of something that could not have been foreseen yet proved extremely damaging when it occurred. With hindsight, I would have limited my 401k contributions to just enough to secure the full employer match, but no more. Or perhaps not taken out a green card. Or perhaps both.

    Im currently paying in just enough to my 401k to secure my full employer match. Im also going through the GC application process; its a bit easier for me, as I wont qualify for the exit tax (either on assets or income), so I should be able to rescind my GC if/when I return to the UK.
  • EdSwippet
    EdSwippet Posts: 1,584
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    spodrod1 wrote: »
    .. In terms of US tax, Ive been declaring the amount in the pension fund on form 8938 on my tax returns.
    Also on an annual FinCEN form 114?

    (The US bureaucracy never does anything once when twice will do.)
  • bostonerimus
    bostonerimus Posts: 5,617
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    edited 13 June 2017 at 7:28PM
    If you have over $2M and are a long term permanent resident and decide to expatriate, then you will have to mark to market and pay the tax. I get the feeling that the OP is a long way from that.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • bostonerimus
    bostonerimus Posts: 5,617
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    spodrod1 wrote: »
    Im currently paying in just enough to my 401k to secure my full employer match. Im also going through the GC application process; its a bit easier for me, as I wont qualify for the exit tax (either on assets or income), so I should be able to rescind my GC if/when I return to the UK.

    If you are applying for a GC you should be centering your finances in the US.
    Are you claiming any tax deferral on the contributions to the stake holder pension? and are you comfortable with the status of the stake holder pension under the Treaty so that gains can be tax deferred?
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • spodrod1
    spodrod1 Posts: 15 Forumite
    Actually no - I reported all my UK bank accounts on 8938 but not on the FBAR; didnt believe I had to do that?
  • spodrod1
    spodrod1 Posts: 15 Forumite
    If you have over $2M and are a long term permanent resident and decide to expatriate, then you will have to mark to market and pay the tax. I get the feeling that the OP is a long way from that.

    Yes he is ;-)
  • spodrod1
    spodrod1 Posts: 15 Forumite
    If you are applying for a GC you should be centering your finances in the US.
    Are you claiming any tax deferral on the contributions to the stake holder pension? and are you comfortable with the status of the stake holder pension under the Treaty so that gains can be tax deferred?

    No to the first question....

    Havent thought about the second.... as I say, I honestly didnt give it too much thought...
  • bostonerimus
    bostonerimus Posts: 5,617
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    spodrod1 wrote: »
    Actually no - I reported all my UK bank accounts on 8938 but not on the FBAR; didnt believe I had to do that?

    If you have to file an 8938 then FBAR would be necessary too as it has a lower threshold. Anything that you have signature authority over goes in the FBAR...so bank accounts and probably a DC pension...but not a DB pension. The threshold for FBAR is $10k in total.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • bostonerimus
    bostonerimus Posts: 5,617
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    edited 13 June 2017 at 7:37PM
    spodrod1 wrote: »
    No to the first question....

    Havent thought about the second.... as I say, I honestly didnt give it too much thought...

    I would stop paying into the UK pension immediately. If you are doing your own taxes make sure you understand the arguments about whether a stake holder pension is Treaty exempt from current US taxation. Some professionals will say it is, others will recommend treating it as a foreign trust and doing PFIC filings. The first approach is the easiest.

    Now I'll ask if you have any S&S ISAs or other UK investment accounts?
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • spodrod1
    spodrod1 Posts: 15 Forumite
    I would stop paying into the UK pension immediately. If you are doing your own taxes make sure you understand the arguments about whether a stake holder pension is Treaty exempt from current US taxation. Some professionals will say it is, others will recommend treating it as a foreign trust and doing PFIC filings. The first approach is the easiest.

    Now I'll ask if you have any S&S ISAs or other UK investment accounts?

    Sometimes it feels like the system is set up to catch you out - if professionals disagree it doesnt give me much hope that Ill ever get on top of this stuff... what would be the best next step to cover myself on this one?

    Just a couple of fairly small savings accounts and a cash ISA; all declared on the FBAR and 8938
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