Vanguard reps are giving conflicting information regarding opening account as non resident alien

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

I have a 401(k) with Vanguard backed by target retirement 2055.

I additionally wanted to open an IRA and a brokerage account to invest in Index funds. It turns out I'm a non-resident alien, but resident alien for tax purposes. This prevents me from opening an account online. So I call Vanguard and ask them - they tell me I can mail a paper form. Now I do this, and they're now telling me that I can't open it as a non-resident alien for citizenship purpose. Not sure what I can do, or can't do with this conflicting information. I can't find anything online that is in agreement with what they are telling me. Can I really not open accounts?

Fidelity doesn't subject you to this nonsense. I was wondering if I really can't open an account with Vanguard, is my option with Fidelity to subscribe to Freedom Index 2055 for IRAs, and the equivalent Total Stock Market Index Funds, and Total International Stock Market Index funds? Will this give me roughly the same advantage? Details:

Instead of target 2055 from Vanguard, I invest in this from Fidelity: https://fundresearch.fidelity.com/mutua ... 15793828[2]
Instead of total stock market index from vanguard, I invest in https://fundresearch.fidelity.com/mutua ... 15911404[3]
Instead of total international stock market index from vanguard, I invest in https://fundresearch.fidelity.com/mutua ... 15911875[4]
User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by in_reality »

As far as I know, Fidelity doesn't open accounts for NRA's either. Perhaps they'd allow existing customers to open additional accounts but generally Fidelity isn't known to be expat friendly.

It's actually based on the regulations in your country of residence. Schwab will open an account for residents of those country that allow it.

In any case, do you have taxable US income anyway?

Interactive Brokers can open accounts everyplace it seems though there may be a monthly minimum commission unless you have assets over $100k I believe.
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

I have a 401(k), so yes, I have taxable income.
prudent365
Posts: 2
Joined: Fri Mar 18, 2016 9:57 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by prudent365 »

I would call BS on that. I am a non-resident alien and have several brokerage and retirement accounts with a few different providers with no issues. They all knew that I was an NRA and only one of them asked me for additional residency documents. I also opened a Vanguard account a couple months ago with no issues despite being asked if I was an NRA. I'm guessing that the rep you were talking to was not all that knowledgeable in handling NRA accounts.
bpr
Posts: 37
Joined: Fri Aug 21, 2015 1:20 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by bpr »

why are you a non-resident alien ? do you have substantial presence in US ? if you have substantial presence you are a resident alien. otherwise just wait for 6 months and become a resident alien.
User avatar
HueyLD
Posts: 7734
Joined: Mon Jan 14, 2008 10:30 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by HueyLD »

I think Vanguard may have changed their account opening policy recently.

A few months ago, I helped an H1B visa holder opening a new account at Vanguard. The form asked two questions. One was "citizenship" and the other was "tax residency."

So, he checked country xyz under citizenship and "resident alien" under tax residency and it was fine with Vanguard.

Has Vanguard changed their account opening form(s) to exclude tax residents?
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

bpr wrote:why are you a non-resident alien ? do you have substantial presence in US ? if you have substantial presence you are a resident alien. otherwise just wait for 6 months and become a resident alien.
I'm already a resident alien for tax purposes. Vanguard has specified multiple times I need residential status for citizenship, not taxes. I've taken my business to Fidelity where I don't have to deal with this nonsense.
User avatar
HueyLD
Posts: 7734
Joined: Mon Jan 14, 2008 10:30 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by HueyLD »

satya wrote:I'm already a resident alien for tax purposes. Vanguard has specified multiple times I need residential status for citizenship, not taxes. I've taken my business to Fidelity where I don't have to deal with this nonsense.
Isn't competition wonderful?
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

HueyLD wrote:
satya wrote:I'm already a resident alien for tax purposes. Vanguard has specified multiple times I need residential status for citizenship, not taxes. I've taken my business to Fidelity where I don't have to deal with this nonsense.
Isn't competition wonderful?
Not really, Fidelity just closed my account because of "risk". At least Vanguard didn't even let me open the account.
katnok
Posts: 171
Joined: Fri Nov 11, 2011 8:36 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by katnok »

I'm an NRA (but a resident alien for tax purposes) as well, but had no trouble opening an IRA and Roth with Vanguard 3 years ago.

I doubt that they changed the rules since I opened my accounts.
User avatar
HueyLD
Posts: 7734
Joined: Mon Jan 14, 2008 10:30 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by HueyLD »

katnok wrote:I'm an NRA (but a resident alien for tax purposes) as well, but had no trouble opening an IRA and Roth with Vanguard 3 years ago.

I doubt that they changed the rules since I opened my accounts.
But that was three years ago.

The account opening form used to ask two questions, one about your citizenship and the other about your tax residency. But the new version of account opening form (online only) asks only the citizenship question. If you say "no" to the question, you are rejected on the spot.
katnok
Posts: 171
Joined: Fri Nov 11, 2011 8:36 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by katnok »

HueyLD wrote:
katnok wrote:I'm an NRA (but a resident alien for tax purposes) as well, but had no trouble opening an IRA and Roth with Vanguard 3 years ago.

I doubt that they changed the rules since I opened my accounts.
But that was three years ago.

The account opening form used to ask two questions, one about your citizenship and the other about your tax residency. But the new version of account opening form (online only) asks only the citizenship question. If you say "no" to the question, you are rejected on the spot.
You are correct, and it happened to me as well. So, I called them to find a way around it. A week later, they sent me a paper application in the mail, which I completed and sent it back. As far as I remember, that's all I needed to do.
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

katnok wrote:
HueyLD wrote:
katnok wrote:I'm an NRA (but a resident alien for tax purposes) as well, but had no trouble opening an IRA and Roth with Vanguard 3 years ago.

I doubt that they changed the rules since I opened my accounts.
But that was three years ago.

The account opening form used to ask two questions, one about your citizenship and the other about your tax residency. But the new version of account opening form (online only) asks only the citizenship question. If you say "no" to the question, you are rejected on the spot.
You are correct, and it happened to me as well. So, I called them to find a way around it. A week later, they sent me a paper application in the mail, which I completed and sent it back. As far as I remember, that's all I needed to do.
I sent the same paper application after they told me that. After they received it they told me their compliance team rejected it.

I have a Schwab account in which I receive RSUs. I'm assuming (hoping) I can buy shares with that account. If I buy the total stock market ETF from Vanguard and hold onto it, is it as good as investing directly through Vanguard (minus the one time transaction charge)? It won't be an IRA, but at least it's invested in alignment with index fund investing?
User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by in_reality »

katnok wrote:I'm an NRA (but a resident alien for tax purposes) as well, but had no trouble opening an IRA and Roth with Vanguard 3 years ago.

I doubt that they changed the rules since I opened my accounts.
Wow! I'm a US citizen and a US person for tax purposes on all my income anyplace in the world, yet Vanguard closed my accounts (or froze them actually) stating that I lived overseas.

Actually it seems shockingly unfair if NRA's can contribute to IRAs for several reasons:

1) NRAs don't pay taxes on global income like citizens do, so they would be eligible for ROTH contributions even when their total global income would push a citizen into ineligibility

2) since NRAs don't pay taxes on global income, they'd more easily be able to do a backdoor ROTH because they'd be in a lower tax bracket by not having to declare all their income

For an NRA to get more favorable tax treatment than an American expat earning the same amount seems extremely unfair.
katnok
Posts: 171
Joined: Fri Nov 11, 2011 8:36 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by katnok »

in_reality wrote: Actually it seems shockingly unfair if NRA's can contribute to IRAs for several reasons:

1) NRAs don't pay taxes on global income like citizens do, so they would be eligible for ROTH contributions even when their total global income would push a citizen into ineligibility
This is not correct. As I mentioned in an earlier post, though I'm an NRA for immigration purposes, when it comes to filling taxes, I'm considered a resident alien, which means I have to declare worldwide income and pay taxes if I owe any.
User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by in_reality »

katnok wrote:
in_reality wrote: Actually it seems shockingly unfair if NRA's can contribute to IRAs for several reasons:

1) NRAs don't pay taxes on global income like citizens do, so they would be eligible for ROTH contributions even when their total global income would push a citizen into ineligibility
This is not correct. As I mentioned in an earlier post, though I'm an NRA for immigration purposes, when it comes to filling taxes, I'm considered a resident alien, which means I have to declare worldwide income and pay taxes if I owe any.
So if you have the same tax obligations as citizens, it seems rather discrimatory.

It's akin to saying heavy eaters can't enter a buffet because the company profit will be less, or Spanish speakers can't enroll in health insurance because it would be additional costs to the company to deal with paper work explanations.

You and I are in the same boat where we pay our fair share of taxes and receive unequal treatment.

Of course there are greater injustices in America today...

Good luck!
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

in_reality wrote:
katnok wrote:
in_reality wrote: Actually it seems shockingly unfair if NRA's can contribute to IRAs for several reasons:

1) NRAs don't pay taxes on global income like citizens do, so they would be eligible for ROTH contributions even when their total global income would push a citizen into ineligibility
This is not correct. As I mentioned in an earlier post, though I'm an NRA for immigration purposes, when it comes to filling taxes, I'm considered a resident alien, which means I have to declare worldwide income and pay taxes if I owe any.
So if you have the same tax obligations as citizens, it seems rather discrimatory.

It's akin to saying heavy eaters can't enter a buffet because the company profit will be less, or Spanish speakers can't enroll in health insurance because it would be additional costs to the company to deal with paper work explanations.

You and I are in the same boat where we pay our fair share of taxes and receive unequal treatment.

Of course there are greater injustices in America today...

Good luck!
My perspective is that they probably got a lot of redemptions going on with NRA who might take their money and go home so that screws me over. I'd appreciate your input on my new thread where I'm exploring if ETF might work:

viewtopic.php?f=1&t=197463
Topic Author
satya
Posts: 14
Joined: Thu Aug 11, 2016 9:46 pm

Re: Vanguard reps are giving conflicting information regarding opening account as non resident alien

Post by satya »

Good news! Fidelity agreed to reopen my account after consideration. Looks like I'll just do 401 with Vanguard and Fidelity IRA + Index Funds..
Post Reply