US W8-BEN - Must You File One?

[Hyperborea]

So, is it required to file a W8-BEN form? I have a few US bank accounts and am soon to become a US NRA. Do I need to file a W8-BEN with those banks? Bank account and CD interest is not subject to US taxes for a NRA. Is there any downside to not filing a W8-BEN? The upside to not filing is that I'm worried that they may close the bank account if I file.

[Maple]

So, is it required to file a W8-BEN form? I have a few US bank accounts and am soon to become a US NRA. Do I need to file a W8-BEN with those banks? Bank account and CD interest is not subject to US taxes for a NRA. Is there any downside to not filing a W8-BEN? The upside to not filing is that I'm worried that they may close the bank account if I file.

Correct, bank account and CD interest is not subject to US taxes for a NRA. But, if you do not file a W8-BEN, you will get 1099 tax slips indicating taxable income and the IRS will expect to receive payment. If you file the W8-BEN, you will receive the correct 1042-S slips for NRAs instead.

[shcnno]

My banks withhold taxes even after filing w8-ben. Are they not supposed to for interest? Even without a tax treaty?

[TedSwippet]

My banks withhold taxes even after filing w8-ben. Are they not supposed to for interest? Even without a tax treaty?

Assuming you hold ordinary deposit accounts with the bank, then according to IRS publication 515 -- the (voluminous!) instructions for 'withholding agents' -- there should be no withholding:

Interest on deposits (Income Code 29).
Foreign persons are not subject to chapter 3 withholding on interest that is not connected with a U.S. trade or business if it is from:

Deposits with persons carrying on the banking business;
Deposits or withdrawable accounts with savings institutions chartered and supervised under federal or state law as savings and loan or similar associations, such as credit unions, if the interest is or would be deductible by the institutions; or
Amounts left with an insurance company under an agreement to pay interest on them.
Deposits include certificates of deposit, open account time deposits, Eurodollar certificates of deposit, and other deposit arrangements.

You may have to file Form 1042-S to report certain payments of interest on deposits. See Deposit interest paid to certain nonresident alien individuals under Returns Required , later. You may also have to file Form 1042-S when the deposit interest is a withholdable payment to which withholding applies (or was applied) chapter 4.

[shcnno]

Hmm, both Schwab and Tdbank withhold tax on the (tiny amount of) interest I receive.

[TedSwippet]

Hmm, both Schwab and Tdbank withhold tax on the (tiny amount of) interest I receive.

Do they send you a 1042-S? If yes, you could try filing a 1040NR return with the IRS to reclaim this withholding. Unless you have a US social security number this will mean applying for a US TIN, something that is (of course) a non-trivial and slow process.

I am in the UK and see no withholding on the (tiny amount of) interest I receive from Vanguard. The UK is a treaty country though, so that does not really tell you much about how this might work in non-treaty ones.

[john.richard2]

So, is it required to file a W8-BEN form? I have a few US bank accounts and am soon to become a US NRA. Do I need to file a W8-BEN with those banks? Bank account and CD interest is not subject to US taxes for a NRA. Is there any downside to not filing a W8-BEN? The upside to not filing is that I'm worried that they may close the bank account if I file.

Did you get an answer to your initial questions? Many people become US NRA after moving out of the US and keep their US account. I am in the same situation and plan to keep my US vanguard account with my US vanguard mutual fund. What would be the worst if vanguard discover that I am a nonresident alien living outside the US?

[LadyGeek]

john.richard2 is asking this same question in a new thread: Keeping a US vanguard account for a non-resident alien.

john.richard2, Welcome!

[Hyperborea]

So, is it required to file a W8-BEN form? I have a few US bank accounts and am soon to become a US NRA. Do I need to file a W8-BEN with those banks? Bank account and CD interest is not subject to US taxes for a NRA. Is there any downside to not filing a W8-BEN? The upside to not filing is that I'm worried that they may close the bank account if I file.

Did you get an answer to your initial questions? Many people become US NRA after moving out of the US and keep their US account. I am in the same situation and plan to keep my US vanguard account with my US vanguard mutual fund. What would be the worst if vanguard discover that I am a nonresident alien living outside the US?

I've not got a definitive answer about the W8-BEN for bank accounts. However, a bank account and a brokerage account are completely different animals. I'd have to go look at the tax treaty table to be sure but I think that almost for sure there will be withholding taxes that the brokerage is required to keep on dividends. You will need to file.

On top of that, there are brokerages that do NOT want to have a NRA client or even US citizens who live outside the US. The company with the biggest reputation for this is Vanguard. There are plenty of stories around about US citizens working overseas and having their accounts frozen or worse terminated. I have US citizen ex-coworkers who while working in one of my ex-company's foreign locations did everything they could to hide the fact from Vanguard (used the US office for mail, Google Voice phone number, VPN when logging in to Vanguard). A couple that I heard of were discovered and had to move their personal account elsewhere and their 401k account was frozen (no transactions).

I had Vanguard accounts until about a year ago and closed them out and moved to Interactive Brokers. There are a lot of good reasons for this besides just being able to keep the account. I can buy ETFs that are domiciled outside the US and so avoid the US estate tax when either my spouse or I pass.

If you really want to hold US ETFs or funds (despite the tax risks) then Schwab is likely to be your best bet. It will probably be easier to set up the account and transfer to them before you leave the US.

[john.richard2]

So, is it required to file a W8-BEN form? I have a few US bank accounts and am soon to become a US NRA. Do I need to file a W8-BEN with those banks? Bank account and CD interest is not subject to US taxes for a NRA. Is there any downside to not filing a W8-BEN? The upside to not filing is that I'm worried that they may close the bank account if I file.

Did you get an answer to your initial questions? Many people become US NRA after moving out of the US and keep their US account. I am in the same situation and plan to keep my US vanguard account with my US vanguard mutual fund. What would be the worst if vanguard discover that I am a nonresident alien living outside the US?

I've not got a definitive answer about the W8-BEN for bank accounts. However, a bank account and a brokerage account are completely different animals. I'd have to go look at the tax treaty table to be sure but I think that almost for sure there will be withholding taxes that the brokerage is required to keep on dividends. You will need to file.

On top of that, there are brokerages that do NOT want to have a NRA client or even US citizens who live outside the US. The company with the biggest reputation for this is Vanguard. There are plenty of stories around about US citizens working overseas and having their accounts frozen or worse terminated. I have US citizen ex-coworkers who while working in one of my ex-company's foreign locations did everything they could to hide the fact from Vanguard (used the US office for mail, Google Voice phone number, VPN when logging in to Vanguard). A couple that I heard of were discovered and had to move their personal account elsewhere and their 401k account was frozen (no transactions).

I had Vanguard accounts until about a year ago and closed them out and moved to Interactive Brokers. There are a lot of good reasons for this besides just being able to keep the account. I can buy ETFs that are domiciled outside the US and so avoid the US estate tax when either my spouse or I pass.

If you really want to hold US ETFs or funds (despite the tax risks) then Schwab is likely to be your best bet. It will probably be easier to set up the account and transfer to them before you leave the US.

Thanks for the update. I agree bank accounts are different and I am only looking at the vanguard issue.

I want to be relatively certain that Vanguard won’t freeze my account without letting me access it or try any legal action because I did not disclose my new residence. Having my money kept by Vanguard and some legal action would be the worst. Vanguard closing my account would not be so bad as I could move to IB but it would be a hassle especially if I go back to the US few years after.

I am looking into staying at Vanguard but I want to understand the worst case scenario. Please let us posted when you get more information. As mentioned above I also opened another thread with a similar question but specific to brokerage account with Vanguard.

[Hyperborea]

I've not got a definitive answer about the W8-BEN for bank accounts. However, a bank account and a brokerage account are completely different animals. I'd have to go look at the tax treaty table to be sure but I think that almost for sure there will be withholding taxes that the brokerage is required to keep on dividends. You will need to file.

On top of that, there are brokerages that do NOT want to have a NRA client or even US citizens who live outside the US. The company with the biggest reputation for this is Vanguard. There are plenty of stories around about US citizens working overseas and having their accounts frozen or worse terminated. I have US citizen ex-coworkers who while working in one of my ex-company's foreign locations did everything they could to hide the fact from Vanguard (used the US office for mail, Google Voice phone number, VPN when logging in to Vanguard). A couple that I heard of were discovered and had to move their personal account elsewhere and their 401k account was frozen (no transactions).

I had Vanguard accounts until about a year ago and closed them out and moved to Interactive Brokers. There are a lot of good reasons for this besides just being able to keep the account. I can buy ETFs that are domiciled outside the US and so avoid the US estate tax when either my spouse or I pass.

If you really want to hold US ETFs or funds (despite the tax risks) then Schwab is likely to be your best bet. It will probably be easier to set up the account and transfer to them before you leave the US.

Thanks for the update. I agree bank accounts are different and I am only looking at the vanguard issue.

I want to be relatively certain that Vanguard won’t freeze my account without letting me access it or try any legal action because I did not disclose my new residence. Having my money kept by Vanguard and some legal action would be the worst. Vanguard closing my account would not be so bad as I could move to IB but it would be a hassle especially if I go back to the US few years after.

I am looking into staying at Vanguard but I want to understand the worst case scenario. Please let us posted when you get more information. As mentioned above I also opened another thread with a similar question but specific to brokerage account with Vanguard.

I think the worst case with Vanguard is that they could close your account and give you a short window of time to move it before they liquidate it and send you a cheque. I see in the other thread that Ted Swippet has been successful at keeping his Vanguard account but that's not been my experience (I called and spoke to a rep and I had a very large account including the 401k of a major corp) nor that of others I've heard from.

The other side is the IRS. You are going to have to worry about the required withholding not being taken and the resulting underpayment on your taxes when you file with the resulting penalties and interest. If you don't file then you may run into IRS issues that cause your account to be frozen/seized.

[TedSwippet]

I see in the other thread that Ted Swippet has been successful at keeping his Vanguard account but that's not been my experience (I called and spoke to a rep and I had a very large account including the 401k of a major corp) nor that of others I've heard from.

I left the US over a decade ago. I wonder if -- or more accurately, suspect that -- FATCA and so on has hardened Vanguard's (and others') stance regarding non-resident accounts. I can certainly attest to the fact that their internal systems and IT infrastructure in places appear to ignore even the basic fact that other countries exist at all!

Can you say how you solved this? Did you simply cash in the 401k, or did you find new IRA home for it into which you could rollover? If so, with whom? I notice that Interactive Brokers claims to offer IRAs for US citizens living anywhere (except Canada!), but I don't know if that extends to non-US citizens in a similar situation. I should probably ask them.

I may well still have my Vanguard accounts for now, but I feel the shadow of increasing US protectionist regulation starting to creep up on them. I fear it may be only a matter of time, and having a plan-B would be handy. For me, cashing in my 401k and IRA would incur a massive unwanted tax cost.

[Hyperborea]

I see in the other thread that Ted Swippet has been successful at keeping his Vanguard account but that's not been my experience (I called and spoke to a rep and I had a very large account including the 401k of a major corp) nor that of others I've heard from.

I left the US over a decade ago. I wonder if -- or more accurately, suspect that -- FATCA and so on has hardened Vanguard's (and others') stance regarding non-resident accounts. I can certainly attest to the fact that their internal systems and IT infrastructure in places appear to ignore even the basic fact that other countries exist at all!

Can you say how you solved this? Did you simply cash in the 401k, or did you find new IRA home for it into which you could rollover? If so, with whom? I notice that Interactive Brokers claims to offer IRAs for US citizens living anywhere (except Canada!), but I don't know if that extends to non-US citizens in a similar situation. I should probably ask them.

I may well still have my Vanguard accounts for now, but I feel the shadow of increasing US protectionist regulation starting to creep up on them. I fear it may be only a matter of time, and having a plan-B would be handy. For me, cashing in my 401k and IRA would incur a massive unwanted tax cost.

I use Interactive Brokers for my IRA (rolled my old IRAs and 401k over to them). I know the website says "US citizens" but IB knows my residency status when I opened the account (resident alien) and I spoke to them about my future residency plans. They had no problems at all with that.

I asked and was told that TD Ameritrade and Schwab will do this too. I moved it all to IB to keep everything in one place. Vanguard specifically told me that I couldn't keep the 401k/IRA with them. I imagine that with the 401k they wouldn't close it but they might stop me from buying or making trades. It happened to one of my ex-coworkers - a US citizen working in a non-US office. This was with the 401k for one of the largest companies in the world.

Your best bet is to open a ticket on your IB account and request clarification on the question.

[TedSwippet]

I use Interactive Brokers for my IRA (rolled my old IRAs and 401k over to them). I know the website says "US citizens" but IB knows my residency status when I opened the account (resident alien) and I spoke to them about my future residency plans. They had no problems at all with that.

Excellent. Thanks for the confirmation. That seems like a relatively strong signal that they might well allow IRA transfers in from an NRA.

I asked and was told that TD Ameritrade and Schwab will do this too. I moved it all to IB to keep everything in one place. Vanguard specifically told me that I couldn't keep the 401k/IRA with them. I imagine that with the 401k they wouldn't close it but they might stop me from buying or making trades. It happened to one of my ex-coworkers - a US citizen working in a non-US office. This was with the 401k for one of the largest companies in the world.

Interesting difference in approach compared to what I've encountered. Some of it may well be country-specific. I believe Canada and the US are in mid regulatory spat over something that means that Vanguard won't let 401k or IRA account holders in Canada do anything except sell funds. So far I've been okay. So far.

Your best bet is to open a ticket on your IB account and request clarification on the question.

I don't have an account with them yet, but I'll certainly ask them my questions. Depending on the answers, and on Vanguard's increasing hostility towards non-residents, I might well open one in future. :-)

Thank you so much for the information (and the steer on Schwab and TD also -- I'll take a look at these too). Much appreciated. Thanks to FATCA and other US tax nonsense, cross-border finances and pensions are becoming a bit of a nightmare, and a multi-decade one at that. If I had my time over again, I might well simply avoid 401ks and IRAs entirely. Or, I might simply choose a different country altogether rather than the US in which to work.

More than a decade has passed since I left the US, and I am still dealing with the tax fallout, with no end in sight. It's more like an unshakeable virus than a tax regime.