*ACTION* Tell the IRS your pension isn’t a foreign trust today!


Click here to tell the IRS to end foreign trust reporting for non-US pensions!

Saving for retirement is an essential right, but IRS rules on how non-US retirement plans are taxed and reported are often a major, and unnecessary, obstacle for Americans abroad seeking to achieve financial security in their senior years.

Many Americans living and working abroad take part in retirement plans set up in their countries of residence. In many cases, these non-US retirement savings are the only option to save for retirement. Many plans, like employer pension plans, don’t provide for an opt-out, and relocating retirement savings to the US is not possible due to local regulations.

Until now, IRS rules on how these plans are taxed and need to be reported don’t take into account the reality of retirement planning for Americans abroad and are so piecemeal and confusing that even tax professionals aren’t sure how to advise US clients.

But now, the IRS is looking to revise the rules and we need your help!

This is a critical opportunity for your voice to be heard.

Here’s all you need to do: 

  1. Go to the relevant US Government page at this link.
  2. Leave a comment! The more personal the better.

Comments close July 8, so be sure to submit before the deadline.

Thanks for your help!! 

DA Global Taxation Task Force
https://www.democratsabroad.org/taxation

Please share this with any friend or family member that might be interested in submitting a formal comment!

 


Do's & Don'ts For Your Submission

Submit with your name or anonymously, we recommend submitting with your name so that the IRS knows that real people are impacted by these regulations.

Do's

  • Share where you’re originally from in the US, your country of residence, how long you’ve lived outside the US, why you originally moved abroad, and what keeps you there. Bonus: add info on how you stay connected to the US (visiting the US, reading the news, etc) and how being an American is part of your identity!
  • State the name of the pension product in your country of residence that you have difficulty with or have trouble opening.
  • Share the problems you’ve had with getting clarity on how to save for retirement as an American abroad.
  • Share details on how the pension product is restricted (monthly/annual/lifetime contributions, how it’s taxed in your country of residence, limits on how you withdraw and when, etc). Bonus: include a link to a government website (in English ideally)!
  • Conclude your statement with a clear ask for the IRS to specify that your non-US pension product is not subject to foreign trust reporting.

Don'ts

  • Mention double taxation (this public comment period is about reporting only NOT taxation)
  • Ask for residency based taxation (The IRS can't make RBT happen, so ask your Members of Congress for that!)
  • Ask for changes to how the IRS treats investments (this comment period is only for reporting of foreign trusts)

Share your story with the IRS during their public comment period! You have until July 8. The more personal the better.

Below are a few example statements.

Example 1

My name is Janet, I’m originally from California and I have lived in the United Kingdom for 25 years. I moved abroad to marry my British husband. I didn’t plan to move abroad, but life just took me there. I am a proud American, I visit my family in California once a year and vote in US elections. My retirement saving options have been severely limited due to having lack of clarity if the UK Self-Invested Pension Plan (SIPP) is recognized as a pension by the IRS. Tax practitioners give conflicting advice on how this pension is reported on my annual US tax return. It has caused me undue stress and anxiety as I grow older and feel I have no way of being able to save for my retirement years. The UK SIPP has a maximum annual contribution limit of £60,000 and a lifetime contribution limit of £1 million and includes a one time tax-free withdrawal up to 25% of the value of the pension in the UK, otherwise all of the withdrawals are taxed just like 401K or IRA withdrawals are taxed. Investments inside the SIPP are limited to certain types of investments, UK laws and regulations are tighter against abuse compared to US laws and regulations, making it impossible to use this account for tax evasion or money laundering. For reference, you can read more about the SIPP on this UK government website: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/self-invested-personal-pensions Please issue clear guidance that the UK SIPP pension product is a recognized pension, and it is not subject to foreign trust reporting to the IRS each year.

Example 2

My name is Todd and my company transferred me from New York to Sydney, Australia over 40 years ago. I moved my wife and two children with me, and this is where we have lived since, this is home. In 1992, my employer started to require that I pay into a state mandated retirement scheme called a Superannuation fund. I have to pay a portion of my salary into this fund since it’s a legal requirement by the Australian government, I have no choice, I can’t opt out. It wasn’t until recently that I was advised by my accountant that my Australian superannuation wasn’t recognized as a pension by the IRS and is subject to foreign trust reporting on the US side. My accountant now charges me an additional $300 to file Form 3520 and 3520-A each year. When I first found out about this reporting requirement, I researched and found conflicting advice on whether the Superannuation is recognized as a pension by the IRS or not. I prefer to err on the side of caution and so I’ve bitten the bullet and pay my accountant to file the form for me each year, but this feels very unfair since the Australian Super is just like a 401k or an IRA, and it actually has a lot more restrictions than a US based pension! So why is the IRS not clear on whether it's a pension or a foreign trust that requires expensive forms? More info about the Australian Super is here: https://www.australiansuper.com/superannuation/what-is-super Please issue clear guidance that the Australian Superannuation Fund is a recognized pension, not subject to foreign trust reporting. I will be retiring soon and I can’t handle all of this complication as I get older and start withdrawing!

Example 3

My name is Paul, I grew up in Kansas but then I moved to Toronto, Canada to go to university where I stayed and have lived here for the past 10 years. I have tried to get clarification on if my Canadian Tax Free Savings Account (TFSA) is deemed a foreign trust when I file my tax return with the IRS each year, but I have received conflicting advice. I do not understand why the IRS can’t just say that the TFSAs is NOT a trust! Because it isn’t! It’s a retirement plan! The US government seems to be wary of anything that’s “foreign” but this retirement plan isn’t foreign to me, it’s one of the only options I have to save for my future. It doesn’t make sense for me to open an IRA or a 401k, my money is in Canadian dollars, I don’t want to deal with transferring money to the US with the currency exchange rate and on top of that US banks won’t even accept me as a customer to open a US retirement account since I don’t live in the US! I also don’t know if I’ll retire in the US or not, so it makes sense for me to be able to pay into my TFSA while I’m resident here. Do you want me to be on the streets relying on government benefits when I retire, or do you want me to plan for it and support myself? I can’t afford to pay the $500 I was quoted to file the foreign trust reporting forms with my 1040, so I have just gone with the “cheapest” advice and file myself and hope for the best. I live in fear of the IRS coming after me to not file something I should have, but how can I comply if the filing requirements aren’t clear in the first place? Even tax professionals I’ve talked to aren’t clear! This isn’t an administerable system! You can read all about the TFSA on the Canadian government’s website, it’s all very clear (unlike the IRS website!) https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html Please just make the guidance clear that the specific TFSA product isn't subject to foreign trust reporting so I know what I can or can’t do to save for my retirement!

By making our voices heard, we can be a part of bringing meaningful change to retirement plan reporting rules and remove major obstacles for Americans abroad that will help them build financial security in their retirement years.

Don’t forget to submit your comment today!