Surrendering Green Card, form W8-BEN, FATCA

Finance, Taxes, Banking, Insurance and Retirement
1
Hey everyone, long time lurker but first time poster here.

I have questions about forms required when opening a bank account. Here's the info:

I'm a Swiss citizen and was a green card holder from early 2012 until early November this year (I spent one year in California on a school exchange).

As soon as I got my signed form I-407 back, I went to open a bank account with the BCV, but I then had to spend a long time there until they finally figured out they needed to make me sign form W-8BEN.

This left me confused because: I am not a US person (anymore) I have zero income from US sources (no bank accounts, assets, nothing) Being a recent graduate, I only recently started working in CH AFTER abandoning my GC and will have no income to declare to the IRS on the 1040NR I will file for 2017 (which I am not required to do but will to give a statement of termination of my tax obligations)

So of course with the whole FATCA mess I got worried that they asked me to sign an IRS form even in the absence of any 'US indicia'. My questions are:

Am I subject to FATCA reporting by my bank?

Does signing this form subject me to IRS inquiries in my last, dual-status tax year?

Any help appreciated !

2

Answers:

No and no.

It’s basically a form that says to the bank you were a Green Card holder, but now you’re not so your accounts don’t need to be reported to the IRS.

You might be asked by BCV to sign it again in a few years’ time, it depends on how each bank handles these things. I have accounts with both UBS and PostFinance. UBS I’ve just done the once, PostFinance asked me to sign another W8-BEN last year since I’d done the first one back towards the end of 2013. Guess it depends on how anxious they are about any change in your citizenship status.

3
W8 BEN is for non US persons, W9 is for US persons.

W8BEN is valid for 3 years.

4
Right, it's as I suspected then - good news for me. Thanks!

I just got really confused and worried because I researched very extensively before surrendering my green card and nowhere did it mention former residents would be required to certify non-US person status in the absence of US-sourced income.

As the US tax treaty for Switzerland allows the US to tax former citizens I got it into my head that I might have understood what I read wrong and that former residents may be subject to the same treatment.

Still, isn't it confusing to require this from someone who was never a citizen? Wouldn't all new clients need to sign a W-8BEN? Even though I know it isn't the case, I got scared at being singled out for this.

So glad I'm not! I feel very relieved to have abandoned this GC before long-term residency kicked in....

Thanks again MF!

5

Then how come UBS haven’t sent me a new form? Signed back in 2013 and not seen one from them since.

No, not all new clients would do. It depends on whether they’re considered a “US Person under US tax law” which as a Green Card holder you were. even though you weren’t earning anything. Anyone who doesn’t have US citizenship or has never held a Green Card doesn’t need to sign a W8-BEN. But when someone does open a new account they are asked if they have a US presence or any US indica - which again you did as a former Green Card holder.

6
Well if you don't have any US assets, no need for a W8BEN, which is for non US persons.

A US person CANNOT sign a W8NEN they must sign a W9.

7

Never said they did.

I became a non-US person and never had any assets in the US. Do have that darned US birthplace thing though.

kltessa, if you have not filed before I would not file a 1040NR now. If you do that won’t terminate your US tax obligations. Only by filing an 8854 form would you do that. If you are under the tax reporting thresholds then DON’T file. It’s not necessary and could open up a can of worms if you do.

How did you get a Green Card for a school exchange anyway? They’re for permanent residency not for just a year to attend school.

8
I got my Green Card because I have family in the US with citizenship (naturalised), not for the school exchange (though it was useful at the time) but now that I no longer plan to live in the US it was pointless to keep it.

Seeing as I only held my Green Card for 5 tax years I cannot file form 8854, this is only for citizens and long-term residents (8 fiscal years) who expatriate and may be subject to the exit tax. Below that duration, even if I had obscene wealth I would not be subject to the exit tax when surrendering my green card.

I was advised (not professional legal advice, mind you, just anecdotal from a lawyer friend) to send the 1040NR, a 1040R for the part of the year I held my GC, and a copy of my I-407 as a residency termination statement to make a clean cut with the IRS.

Her point was that without a 1040NR I lack a document with a statute of limitations to close off any potential investigations. The 1040NR has a 3-year limit on any investigations barring serious errors or fraud.

9

Hate to say it, but lawyers have as little idea of these things as most other people do. The 8854 form is not just for people subject to the exit tax, it’s for all ex-US citizens and green card holders regardless of whether they meet the monetary requirements or not. This is what the 8854 instructions say:

“Lawful permanent resident. You are a lawful permanent resident of the United States if you have been given the privilege, according to U.S. immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if you have been issued an alien registration card, also known as a “green card,” and your green card hasn’t been revoked or judicially or administratively determined to have been abandoned, and you haven’t commenced to be treated as a resident of a foreign country under a tax treaty between the United States and such foreign country. You aren’t treated as a lawful permanent resident if you commenced to be treated as a resident of a foreign country under a tax treaty, didn’t waive the benefits of such treaty applicable to foreign residents, and notified the IRS of such a position on a Form 8833 attached to a timely filed income tax return. If you were already an LTR at the time you commence to be treated as a resident of such foreign treaty country, then you will be treated as having expatriated as of that date.”

https://www.irs.gov/pub/irs-pdf/i8854.pdf

I see nothing in the instructions that specifies a minimum number of fiscal years.

What you can do, and probably should given the above, is fill in an 8854 form and attach a letter/document stating that you haven’t filed US tax returns since you’ve never met the reporting thresholds required.

If you have already been filing, then yes you need to do the final 1040NR form AND the 8854 as well. The 8854 form is the only one which gets you cleanly out of the US tax system. If it’s not filed you will be considered a “covered expatriate” and that may cause problems for you in the future. Mr. Reed hasn’t succeeded yet, but the amendment is law and they might get it working some day.

https://en.wikipedia.org/wiki/Reed_A…t_(immigration

10
My lawyer friend isn't the one who said I don't need to file 8854, she only advised I provide some form of statement even without the need for the form. I came to that conclusion myself by reading the instructions for form 8854, which state the following:

" Purpose of Form

Expatriation tax provisions apply to U.S. citizens who have relinquished their citizenship and long-term residents who have ended their residency (expatriated). Form 8854 is used by individuals who have expatriated on or after June 4, 2004.

The date on which you are considered to have expatriated determines which Parts of the form you must complete. You are considered to have expatriated on the date you relinquished your citizenship (in the case of a former citizen) or terminated your long-term residency status (in the case of a former U.S. resident). If you expatriated after June 3, 2004, and before June 17, 2008, see the relevant section under General Instructions and complete Parts I, II, and V. If you expatriated after June 16, 2008, and before January 1, 2017, see the relevant section under General Instructions and complete Parts I and III. If you expatriated in 2017, complete Parts I, IV, and V.

Expatriation. Expatriation includes the acts of relinquishing U.S. citizenship and terminating long-term residency.

"

So if I'm not a long-term resident, terminating my permanent residency does not constitute an expatriating act and expatriation tax provisions do not apply to me. And:

" Who Must File

You must file your initial Form 8854 if you relinquished your U.S. citizenship or you are an LTR and terminated your residency status.

You must file your annual Form 8854 if you expatriated before 2017 and you:

Deferred the payment of tax, Have an item of eligible deferred compensation, or Have an interest in a nongrantor trust. "

All from https://www.irs.gov/instructions/i8854

Based on these instructions, I do not have to file form 8854. I've held a green card in 5 consecutive fiscal years - less than 8 - which does exempt me of this obligation. My total income before the November date on the I-407 is zero, and my US-sourced income after that date will also be zero (less than 7000 CHF to be earned in Switzerland by Dec 31st).

Based on these documents I have no need to file a 8854 or even a 1040 of any kind, but I am uneasy leaving things without some dated statement that can prove I am beyond the IRS' reach.

11

Unfortunately you missed the most important part:

" Covered expatriate .

You are a covered expatriate if you expatriated after June 16, 2008, and any of the following statements apply.

  1. Your average annual net income tax liability for the 5 tax years ending before the date of expatriation is more than the amount listed next.

a. $139,000 for 2008.

b. $145,000 for 2009.

c. $145,000 for 2010.

d. $147,000 for 2011.

e. $151,000 for 2012.

f. $155,000 for 2013.

g. $157,000 for 2014.

h. $160,000 for 2015.

i. $161,000 for 2016.

j. $162,000 for 2017.

  1. Your net worth was $2 million or more on the date of your expatriation.

  2. You fail to certify on Form 8854 that you have complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation."

If you are uneasy then file the 8854 form because it’s the only one that gets you out of the US tax system cleanly. Filing just a 1040NR will not do this. You will still be considered a “covered expat” if you do not file the 8854.

I only needed to file FBAR forms when I renounced since I also had no income, but still needed to do the 8854 form to finish everything off and make sure I was out of the system properly.

Whatever you send make sure it’s done by registered post and make sure you print off and keep a copy of the tracking info as well as proof of delivery. Because that’s the only thing you’ll have to show that the relevant US authorities received your documents. You will get no other acknowlegement, unless the IRS decides you do owe them tax - then they’ll contact you. But a “thanks for your return, you’re all clear” letter - forget it, won’t happen.

12
But the above states you have to expatriate AND fill one of three conditions (only the last of which would apply to me if I don't file 8854). Abandoning a green card within 7 or less years of holding it does not make me an expatriate:

"

Expatriation . Expatriation includes the acts of relinquishing U.S. citizenship and terminating long-term residency.

Long-term resident (LTR) defined. You are an LTR if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your status as an LTR ends. In determining if you meet the 8-year requirement, don't count any year that you were treated as a resident of a foreign country under a tax treaty and didn't waive treaty benefits applicable to residents of the country."

So if I "fail" to file a 8854 while not technically being an expatriate, I cannot become a covered expatriate.

I think there's some confusion here because I tagged my original post as 'expatriation' but rigorously speaking, green card holders only become expatriates (covered or not) if they held the GC in 8 of the last 15 fiscal years. You say you renounced citizenship, in which case you needed to file 8854 regardless of any other factors, but it's different if one hasn't held a green card for long enough.

13
Have you officially renounced your Green Card?

A friend had to do that, as he was denied his position on the board of the (Swiss) family company until he did so, despite his Green Card being long expired, as he was still a US person for tax purposes!

Tom

14
Hey Tom,

Yeah I've officially renounced my GC, the signed I-407 returned to me and everything Unless a court of law has forcibly removed your GC or you sign a I-407, you're still a US person.

I am a non-US person for both tax AND immigration purposes. At this point, my only worries are how to cleanly exit the tax system and have normal banking relations.

15
In that case, showing them the 407 should be enough, though I can ask my friend next Saturday when he comes to visit.

Tom

16
Just a follow-up, it turns out it is all in order, my bank has lifted the FATCA block on my case and opened an account for me.

I don't know how it is for former citizens, but the BCV employee told me that for former residents (such as myself), the W-8BEN is only necessary for the first 18 months after forfeiting residency.

This may be why some haven't been asked to fill another one after the form's statute of limitations runs out