Author Topic: Investing while living abroad - IRS reporting rules  (Read 3398 times)

jnc

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Investing while living abroad - IRS reporting rules
« on: May 25, 2015, 02:59:26 PM »
Hi all,
I'd like to solicit ideas for those of us who are US citizens but living outside the US. Because of the IRS reporting rules which have come about (somewhat recently I think), we're finding it difficult opening anything other than a savings account while living in Europe.That's because most financial institutions here seem unable/unwilling to comply with the new IRS reporting regulations... My wife had an ISA account from childhood in the UK and they are forcing her to close it because they will not deal with US citizens.

So what are your ideas for investing while living abroad? Of course, I can always exchange EUR -> USD and transfer it back to my US brokerage accounts but with the exchange rate, that doesn't seem like the best solution. Anyone else in the same boat? Would love your thoughts.

alurblaze

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Re: Investing while living abroad - IRS reporting rules
« Reply #1 on: May 25, 2015, 03:21:20 PM »
I am replying to receive comments.

pka222

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Re: Investing while living abroad - IRS reporting rules
« Reply #2 on: May 25, 2015, 03:40:43 PM »
I personally can't think of anyone other that Vanguard that I'd what to invest with- and lucky you- you're American.
I've been out of the US for 9 years, I use a family member's address for banking/investment mail and actually get all info via email.  I have my living expenses deposited locally and the rest transferred via wire to my US account each month- 25$ fee.  Nice thing is you get to fill out an IRS form 2555- up to 92,000 USD before uncle Sam wants a cut.
Living outside the US hasreduced my time to FI by 30% at least.  Best of luck

beltim

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Re: Investing while living abroad - IRS reporting rules
« Reply #3 on: May 25, 2015, 03:54:56 PM »
Of course, I can always exchange EUR -> USD and transfer it back to my US brokerage accounts but with the exchange rate, that doesn't seem like the best solution. Anyone else in the same boat? Would love your thoughts.

I don't live abroad but I seriously considered it a while ago and looked into banking details, and eventually realized that transferring funds to US brokerage accounts is exactly what I would have had to do.  Of course, keeping assets in dollars worked fine for me because I intended to come back to the US.  Is there some reason you're worried about the exchange rate now?

vivek440

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Re: Investing while living abroad - IRS reporting rules
« Reply #4 on: May 25, 2015, 04:57:57 PM »
Nice thing is you get to fill out an IRS form 2555- up to 92,000 USD before uncle Sam wants a cut.

Not sure, what do you mean by this! Could you elaborate? Do you mean that you don't have to pay tax up to 92,000 USD (Difficult to believe :-))?

pka222

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Re: Investing while living abroad - IRS reporting rules
« Reply #5 on: May 25, 2015, 06:31:35 PM »
@Vivek440- That is correct- as long as you have a overseas home and are a "bona fied" resident of the   country you reside in (and do not maintain a US residence) - you can fill out a IRS from 2555 and reduce your foreign earned income by $99,200 USD this year + exclude housing costs .
Kicks ass really
for more information see
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCYQFjAB&url=http%3A%2F%2Fwww.irs.gov%2Fpub%2Firs-pdf%2Ff2555.pdf&ei=kr1jVd3UPNHdoATMk4OwDA&usg=AFQjCNE-9EWKxB7dfyrTLmpHBPX3Z_pprQ&sig2=LW9ANpWXm66vfvj8cTBu1A&bvm=bv.93990622,d.cGU

jnc

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Re: Investing while living abroad - IRS reporting rules
« Reply #6 on: May 26, 2015, 04:58:20 AM »
I personally can't think of anyone other that Vanguard that I'd what to invest with- and lucky you- you're American.
I've been out of the US for 9 years, I use a family member's address for banking/investment mail and actually get all info via email.  I have my living expenses deposited locally and the rest transferred via wire to my US account each month- 25$ fee.  Nice thing is you get to fill out an IRS form 2555- up to 92,000 USD before uncle Sam wants a cut.
Living outside the US hasreduced my time to FI by 30% at least.  Best of luck

Thanks for sharing. Glad to hear living abroad has accelerate your FI journey!

jnc

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Re: Investing while living abroad - IRS reporting rules
« Reply #7 on: May 26, 2015, 05:13:40 AM »
Of course, I can always exchange EUR -> USD and transfer it back to my US brokerage accounts but with the exchange rate, that doesn't seem like the best solution. Anyone else in the same boat? Would love your thoughts.

I don't live abroad but I seriously considered it a while ago and looked into banking details, and eventually realized that transferring funds to US brokerage accounts is exactly what I would have had to do.  Of course, keeping assets in dollars worked fine for me because I intended to come back to the US.  Is there some reason you're worried about the exchange rate now?

I do maintain assets in dollars since I still have a brokerage account in the US and also own rental properties, so I am still covered on that front.

The reason I was worried about the exchange was in terms of costs:
- international wire transfer fees, especially if one is making transfers every month
- commissions or costs associated with the currency exchange (though I did use xetrade once and was quite happy with them. They offer competitive rates and do not charge additional commissions)
- currency risk: however I guess investing in euros in international stocks is not going to protect me against that  currency risk

Hmmm, I think I am coming around to the same conclusion that perhaps it's just best to convert EUR to USD and transfer it to my Vanguard account. I will have to check the costs more closely to make sure that's ok.


mungo

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Re: Investing while living abroad - IRS reporting rules
« Reply #8 on: May 26, 2015, 08:26:02 AM »
I'm an American living in the UK, and I've read a lot around this issue.  No clear answers (I don't think they exist?), but here's where I've ended up.

You don't say where in Europe you live, but if it's the UK, I recently found out that YouInvest do allow you to do a SIPP (this is what they told me via email, at least--I haven't actually opened an account yet).  They offer a pretty wide variety of funds, including a bunch of Vanguard ones. I believe that the recent FATCA agreement (Sept 2014?) between the US and UK said that banks don't have to report on ISAs and SIPPs, so it might be that other banks will wake up and start to allow US citizens to hold those sorts of accounts. Technically the US government can/will leverage massive fees if you own foreign-domiciled funds; if you hold them in a retirement account, it's a bit of grey area, but if the bank doesn't have to report the SIPP.... 

I have a feeling you'll find buying US Vanguard complicated.  You may want to check out this article on US Citizens buying mutual funds while they're resident abroad:
https://americansabroad.org/issues/banking/mutual-fund-restrictions/

Nice thing is you get to fill out an IRS form 2555- up to 92,000 USD before uncle Sam wants a cut.

Not sure, what do you mean by this! Could you elaborate? Do you mean that you don't have to pay tax up to 92,000 USD (Difficult to believe :-))?

Just to be clear: you aren't paying US taxes, but you are still liable for taxes in whatever country you live in.  Also, this limit only applies to *earned* income, not investment income.

jnc

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Re: Investing while living abroad - IRS reporting rules
« Reply #9 on: May 26, 2015, 02:44:23 PM »
I'm an American living in the UK, and I've read a lot around this issue.  No clear answers (I don't think they exist?), but here's where I've ended up.

You don't say where in Europe you live, but if it's the UK, I recently found out that YouInvest do allow you to do a SIPP (this is what they told me via email, at least--I haven't actually opened an account yet).  They offer a pretty wide variety of funds, including a bunch of Vanguard ones. I believe that the recent FATCA agreement (Sept 2014?) between the US and UK said that banks don't have to report on ISAs and SIPPs, so it might be that other banks will wake up and start to allow US citizens to hold those sorts of accounts. Technically the US government can/will leverage massive fees if you own foreign-domiciled funds; if you hold them in a retirement account, it's a bit of grey area, but if the bank doesn't have to report the SIPP.... 

I have a feeling you'll find buying US Vanguard complicated.  You may want to check out this article on US Citizens buying mutual funds while they're resident abroad:
https://americansabroad.org/issues/banking/mutual-fund-restrictions/

Nice thing is you get to fill out an IRS form 2555- up to 92,000 USD before uncle Sam wants a cut.

Not sure, what do you mean by this! Could you elaborate? Do you mean that you don't have to pay tax up to 92,000 USD (Difficult to believe :-))?

Just to be clear: you aren't paying US taxes, but you are still liable for taxes in whatever country you live in.  Also, this limit only applies to *earned* income, not investment income.

Hi Mungo,
Thanks a lot for the reply. We live in the Netherlands right now, not the UK. Though as I said in my original post, my wife had an ISA in the UK since childhood and JP Morgan is forcing her to close the account by July because she is a US person and they don't want to comply with the IRS rules... So I am not sure about the banks not having to comply with FATCA rules for ISA and SIPPs. You may want to double check that, given our recent unfortunate experience.