Changes in US policies on Expats Earning Abroad

Google FACTA.

suefrankdahl wrote:

Google FACTA.

FATCA.

and FBAR too.

gardener1 wrote:

suefrankdahl wrote:

Google FACTA.

FATCA.

and FBAR too.

FACTA, schmacta..,. it's all bad news....no matter how you spell it

Read all the US gov't press releases about it from Jan 1 to June 30th. If your account is less than $50K it is not subject to US taxes. The first country to support it and sign on was France.

suefrankdahl wrote:

Read all the US gov't press releases about it from Jan 1 to June 30th. If your account is less than $50K it is not subject to US taxes.

Not so.  There is no minimum amount of investment income subject to tax. The question is whether FATCA imposes additional reporting requirements beyond simply reporting the investment income on your Form 1040 and paying taxes on it.  In some cases, there is a $50,000 threshold and sometimes it is higher.  And, in all cases, even if FATCA does not require the additional reporting, the taxpayer is still obligated to complete and file by June 30 each year a FinCen 114 (formerly form TD F 90-22.1).  The FinCen 114 reporting threshold is $10,000.  http://www.irs.gov/Businesses/Compariso … quirements

FATCA requires U.S. taxpayers who hold foreign financial assets with an aggregate value of at least the "Reporting Threshold" to report information about those assets on Form 8938, which must be attached to the taxpayers annual income tax return. The Reporting Threshold differs, depending on where the taxpayer resides and his or her marital status.  From the IRS website:

Taxpayers living abroad.

You must file a Form 8938 if you must file an income tax return and:

(i)  You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. These thresholds apply even if only one spouse resides abroad. Married individuals who file a joint income tax return for the tax year will file a single Form 8938 that reports all of the specified foreign financial assets in which either spouse has an interest.

(ii) You are not a married person filing a joint income tax return and the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year.

Taxpayers living in the United States.

You must file Form 8938 if you must file an income tax return and:

(i)  You are unmarried and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year

(ii)  You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

(iii)  You are married filing separate income tax returns and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For purposes of calculating the value of your specified foreign financial assets in applying this threshold, include one-half the value of any specified foreign financial asset jointly owned with your spouse. However, report the entire value on Form 8938 if you are required to file Form 8938.

Form 8938 Does Not Relieve Filers of FBAR Filing Requirements

If you have a financial interest in or signatory authority over an offshore financial account, you must report the account on an FBAR (Form 114 (formerly TD F 90-22.1)), regardless of your obligation to file Form 8938. Certain foreign financial accounts are reported on both Form 8938 and the FBAR. However, the information required by the forms is not identical in all cases. Different rules, key definitions (for example, financial account), and reporting requirements apply to Form 8938 and FBAR reporting. Because of these differences, certain foreign financial accounts may be reported on one but not both forms. A chart comparing Form 8938 and FBAR filing requirements is available at Comparison of Form 8938 and FBAR Requirements.

The due date for filing the FBAR is June 30 for financial accounts for which the filer had a financial interest or signature authority during the previous calendar year. The FBAR is filed electronically through the Financial Crimes Enforcement Networks BSA E-filing System. Form 8938 is due with your annual income tax return and filed with the applicable IRS service center.

Specified foreign financial assets held outside of an account with a financial institution are reported on Form 8938, but not reported on the FBAR.

Susan F. wrote:

I've been hearing about many changes that the US is placing on foreign banks who handle US expats's accounts. I am in the process of considering retirement in Ecuador. My money would come from a small trust and my Social Security income. Does anyone know how the upcoming changes will affect Americans' abilities to access their funds, or if the new laws will affect how foreign banks will deal with US expats' accounts?

Thanks ahead of time for any information you might be able to provide.

On another thread FATCA is discussed and specifically the importance in selecting an Ecuadorian bank (assuming you will be opening a local bank account) that is registered with the IRS as a "Foreign Financial Institution."  This list is located at:

http://apps.irs.gov/app/fatcaFfiList/flu.jsf

Select "Ecuador" and hit search to pull list of FFIs in Ecuador.  The effect of this means that wire transfers and payments from U.S. financial institutions to your Ecuador account at a registered FFI will not have 30% withheld as taxes.

SawMan wrote:

suefrankdahl wrote:

Read all the US gov't press releases about it from Jan 1 to June 30th. If your account is less than $50K it is not subject to US taxes.

Not so.  There is no minimum amount of investment income subject to tax. The question is whether FATCA imposes additional reporting requirements beyond simply reporting the investment income on your Form 1040 and paying taxes on it.  In some cases, there is a $50,000 threshold and sometimes it is higher.  And, in all cases, even if FATCA does not require the additional reporting, the taxpayer is still obligated to complete and file by June 30 each year a FinCen 114 (formerly form TD F 90-22.1).  The FinCen 114 reporting threshold is $10,000.  http://www.irs.gov/Businesses/Compariso … quirements

FATCA requires U.S. taxpayers who hold foreign financial assets with an aggregate value of at least the "Reporting Threshold" to report information about those assets on Form 8938, which must be attached to the taxpayers annual income tax return. The Reporting Threshold differs, depending on where the taxpayer resides and his or her marital status.  From the IRS website:

Taxpayers living abroad.

You must file a Form 8938 if you must file an income tax return and:

(i)  You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. These thresholds apply even if only one spouse resides abroad. Married individuals who file a joint income tax return for the tax year will file a single Form 8938 that reports all of the specified foreign financial assets in which either spouse has an interest.

(ii) You are not a married person filing a joint income tax return and the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year.

Taxpayers living in the United States.

You must file Form 8938 if you must file an income tax return and:

(i)  You are unmarried and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year

(ii)  You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

(iii)  You are married filing separate income tax returns and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For purposes of calculating the value of your specified foreign financial assets in applying this threshold, include one-half the value of any specified foreign financial asset jointly owned with your spouse. However, report the entire value on Form 8938 if you are required to file Form 8938.

Form 8938 Does Not Relieve Filers of FBAR Filing Requirements

If you have a financial interest in or signatory authority over an offshore financial account, you must report the account on an FBAR (Form 114 (formerly TD F 90-22.1)), regardless of your obligation to file Form 8938. Certain foreign financial accounts are reported on both Form 8938 and the FBAR. However, the information required by the forms is not identical in all cases. Different rules, key definitions (for example, financial account), and reporting requirements apply to Form 8938 and FBAR reporting. Because of these differences, certain foreign financial accounts may be reported on one but not both forms. A chart comparing Form 8938 and FBAR filing requirements is available at Comparison of Form 8938 and FBAR Requirements.

The due date for filing the FBAR is June 30 for financial accounts for which the filer had a financial interest or signature authority during the previous calendar year. The FBAR is filed electronically through the Financial Crimes Enforcement Networks BSA E-filing System. Form 8938 is due with your annual income tax return and filed with the applicable IRS service center.

Specified foreign financial assets held outside of an account with a financial institution are reported on Form 8938, but not reported on the FBAR.

So when you say "additional" reporting, that is what is done on form 8938? Given this new law is there any advantage to having a foreign financial account?

suefrankdahl wrote:

So when you say "additional" reporting, that is what is done on form 8938? Given this new law is there any advantage to having a foreign financial account?

I think the consequences of the UBS and other enforcement actions that occurred prior to FATCA made American citizens financial pariahs around the world.  Unfortunately, the actions of a few (or more) seeking to commit tax evasion made it far worse for everyone else simply needing to have foreign banking services.  FATCA at least sets the ground rules for reporting and tells the foreign banks what they must report or be prepared to report if they want to mess with U.S. clients.  So, FATCA may improve expats' access to banking.  I was surprised by the number of Ecuador banks registering with the IRS as FFIs.  Because a local bank account by an expat sure seems like a necessity to me to have ready access to cash for living expenses and to select a bank that is an FFI so you can readily wire money to from a U.S. account without the 30% withholding.

As I've posted elsewhere, I also favor foreign investment accounts for those U.S. taxpayers wanting better access to foreign markets for investing and, through the proper vehicle such as a non-U.S. irrevocable trust, better protection from spurious lawsuits in the U.S. and diversification from political risks.  Again, the trend by foreign investment firms to set up separate SEC registered firms for U.S. clients seems to have improved the situation for the law abiding investor expecting to report investment activity anyway.

If you look at Form 8938, the information is already covered by the FinCEN 114 so personally I would error on the side of including it as a matter of practice with your 1040 return.  It's not like the IRS won't find out about it and it will help you sleep at night.

Mostly a lot of bru-ha-ha over nothing.  You are required to file a US tax return if you have any income (interest, dividend, pension, Social Security) from the US anyway.  This is one more piece of paper to add to your return, so why all the worry?

If you are out of the country for 330 days per year (or even less, if you pass a test of "intention"), then your first $100K (approx) of earned income is tax free.  Note that is only 'earned income.' There is no such exclusion for interest, dividends, IRA withdrawals, etc.

Personally I let my US income go into a US bank, then transfer money to Ecuador as I need it.  The banks down here are nowhere near as well backed as US banks, regardless of what some tin-hat worriers may say.

A good example was a year ago when one went under. Anyone with more than $31K did not receive a dime (later raised to $45K after much knashing of teeth). We have a friend that put in $25K for an investment visa and let the interest ride. Two years later her balance was $32K (they were paying 10% on the CD) and the bank went bust.  She lost it all, and Ecuador then told her she did not have an investment visa anymore and would have to come up with a new $25K to stay here.  (Her lawyer got her a reprieve and many months later the government raised the threshold of payment to $45K, so she got her money back and was able to stay)

This is NOT a good place to put any significant amount of money.  For those that cry that the US dollar is in trouble, guess what will happen in Ecuador if the dollar collapses?

The changes are intended to collect income taxes from those earning money in other countries.  The impact on you should be minimum or zero.  I suggest you get a credit card that does not charge international transaction fees.  My wife found a Mastercard that meets that criteria.  Most cards charge 2% or 3%.  Avoid them., When in Ecuador, use the credit card for everything you can.  Then pay the credit card using online banking.  That way, you avoid the ATM fees and bank transfer fees.  Use ATM's for the cash you need,  Opening a bank account in Ecuador will require you to have a Cedula.  You can only get that after you have established some residency or can show an income in Ecuador.  It can be complex.  Keep as much of your money as you can in the US. If you take money to Ecuador and then try to take it back to the USA, the Ecuadorian government will charge you 5% tax.

Thanks for this valuable information. However, I have a question, please.

As a property owner, must I show my income as part of obtaining my residency visa?

Also, I had the understanding that a bank in Guayaquil was a good place to have Social Security income deposited. Now that I've read you post, I'm having second thoughts.

Could someone please share their their knowledge on these subjects?

Thanks for any light you might be able to shed on my queries!

Susan:
You can keep your money in USA, not need to open an account here, if you have a debit card you can pull money from any versatel machine here in Ecuador.

" Does anyone know how the upcoming changes will affect Americans' abilities to access their funds, or if the new laws will affect how foreign banks will deal with US expats' accounts?"

I have heard that accessing money from ATM machines will not be an issue if the funds are in a US bank.  Banks and the expat US citizen does have to report at tax time if their bank account or bank accounts totals $10,000 USD on any one day.

Many expats use the ATM to access money in the US for rent etc.  we also use our debit card at SuperMaxi and Grand Aki here in Cuenca. There is no reporting requirement on those  funds.  Manyl Ecuadorian banks already comply with the reporting regulations as they have branches in the US.

quito0819 wrote:

" Does anyone know how the upcoming changes will affect Americans' abilities to access their funds, or if the new laws will affect how foreign banks will deal with US expats' accounts?"

I have heard that accessing money from ATM machines will not be an issue if the funds are in a US bank.  Banks and the expat US citizen does have to report at tax time if their bank account or bank accounts totals $10,000 USD on any one day.

Many expats use the ATM to access money in the US for rent etc.  we also use our debit card at SuperMaxi and Grand Aki here in Cuenca. There is no reporting requirement on those  funds.  Manyl Ecuadorian banks already comply with the reporting regulations as they have branches in the US.

This topic (along with some random, off-topic posts) is discussed more fully on another thread:

https://www.expat.com/forum/viewtopic.php?id=258876

The main potential impact is the ability to transfer money from a U.S. bank to another country.  You'll need to check with the U.S. bank issuing your debit card for their policy and whether it will change.  Compliance with U.S. laws in terms of reporting is up to the individual Ecuadorian bank to decide.  A link to the FFI list, also in that thread, will tell you which Ecuador banks have committed to complying with IRS reporting.  None do so now.

1. Check on FATCA,  a U.S. law that went into effect 1 Jan 2014 I think -- which has many people with large assets in a tizzy who want to emigrate.   I am unaware of other new important financial restrictions other than what your consulate can tell you.   I don't think you can bring more than X amount of $$$  -- I do not remember the amount.  FInd an intl. lawyer in TX that can ask the right questions ---

2. Look online at the Ecuador EMbassy site in D.C..which can advise you additionally.

Good luck, Sue in QUito

Yes, a lot of brouhaha over just about nothing... I handle my finances from the U.S. and all works well for me.

Nothing? Haha... I could not resist to make a comment.. Yes u are moving 100k and gov keeps 35k... No big deal at all... Nothing really... Banks worldwide are bullied into thousands of pages of this new law implementation... Have to hire an individual  specializing in this law to serve the all pwerful us gov.. It started on 1 july this year. 

Hi, I'm new to Expatblog,

While the topic at this forum is Changes in US Policies for US Expats and other investment issues, if any of you want to know about a serious, now in the courts legal action against FATCA and one country's IGA, take a look at the #2 posting over in the Brazil Forum called FATCA & FBAR; who's running the show here anyway? 

Happy New Year
LLGM