IRS Reporting of United Kingdom Retirement for FBAR & FATCA
IRS Reporting of United Kingdom Retirement
The IRS reporting of United Kingdom retirement for FBAR & FATCA is less complicated than the tax rules, but still unnecessarily complex.
The IRS general rule is that you have to report foreign retirement on the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114) and FATCA (Foreign Account Tax Compliance Act).
More specifically, you report your Foreign Pension on a variety of different forms (facts and circumstances depending) such as a
Here is a basic summary of the IRS reporting of United Kingdom retirement for FBAR. & FATCA:
FBAR
Most U.K. Pension Plans are reportable on the FBAR as a Foreign Bank and Financial Account.
The value is exchanged into USD. If the plan is a defined benefit plan, with no surrender value other than the received distributions, the FBAR value is zero, until the filer begins to take distributions.
Once distributions are taken, the value will change accordingly.
FATCA
As with the FBAR, U.K. Pension Plans are reportable on FATCA Form 8938 as an asset. Depending on the type of retirement will determine how it is reported on the 8938.
Like the FBAR, the value is exchanged into USD.
If the plan is a defined benefit plan, with no surrender value other than the received distributions, the FBAR value is zero, until the filer begins to take distributions. Once distributions are taken, the value will change accordingly
PFIC
Unfortunately, this is a term that is thrown around loosely by tax professionals who have no idea what it means.
A PFIC is a Passive Foreign Investment Company. Not every foreign retirement plan will be considered a PFIC. In fact, the majority of them will not be a PFIC.
But, if it is a private pension plan in which there were no employer contributions and the investment is made into a mutual fund (or several funds), the PFIC rules may come into play.
IRS Compliance – What Happens if I do not Report?
The IRS has the right to issue various monetary penalties, and has various tools at its disposal to enforce the judgment. Taxpayers can avoid these harsh outcomes with offshore voluntary disclosure.
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