Treasury IBonds for non-resident US-citizens

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Topic Author
occambogle
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Treasury IBonds for non-resident US-citizens

Post by occambogle »

US Treasury IBonds seem like a pretty good deal at the moment... Just wondering if there are any US expats on here who are using them... i.e. U.S. citizens resident outside the U.S.

They say quite clearly that U.S. citizens may own them whether they are resident in the U.S. or live abroad, but I'm just wondering if there are any pitfalls for non-residents to be aware of. For example mechanisms that inhibit easy online access to TreasuryDirect like IP geolocation blocking or SMS verification that only works on U.S. mobiles... similar to how many IRS electronic services don't work for U.S. citizens living abroad. Also, what is the tax-reporting (U.S) like... I assume it is easy?
TedSwippet
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Re: Treasury IBonds for non-resident US-citizens

Post by TedSwippet »

occambogle wrote: Thu Sep 22, 2022 2:54 am They say quite clearly that U.S. citizens may own them whether they are resident in the U.S. or live abroad, but I'm just wondering if there are any pitfalls for non-residents to be aware of. For example mechanisms that inhibit easy online access to TreasuryDirect like IP geolocation blocking or SMS verification that only works on U.S. mobiles... similar to how many IRS electronic services don't work for U.S. citizens living abroad.
Reported insistence on your having a US bank account and a verifiable US address (driver's licence, credit history, etc)? Potentially useful thread:

Buying I-Bonds from overseas - Bogleheads.org
Topic Author
occambogle
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Re: Treasury IBonds for non-resident US-citizens

Post by occambogle »

Thanks for the link Ted, this was the kind of info I was looking for. Though am not clear from that thread - do you happen to understand if the problem is that they couldn't open US bank account without US address, or that even if they had US bank account that TreasuryDirect also were requiring US address? I have US bank accounts that isn't a problem, but I don't have a US address.
EddyB
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Re: Treasury IBonds for non-resident US-citizens

Post by EddyB »

occambogle wrote: Thu Sep 22, 2022 4:21 am Thanks for the link Ted, this was the kind of info I was looking for. Though am not clear from that thread - do you happen to understand if the problem is that they couldn't open US bank account without US address, or that even if they had US bank account that TreasuryDirect also were requiring US address? I have US bank accounts that isn't a problem, but I don't have a US address.
Not Ted, but without a US address, you may not be able to activate the account online because their system may not be able to verify your identity. There’s a form to complete for verification, requiring either notarization or a Medallion guarantee. https://www.treasurydirect.gov/pdf/rs/acctauth.pdf
Valuethinker
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Re: Treasury IBonds for non-resident US-citizens

Post by Valuethinker »

occambogle wrote: Thu Sep 22, 2022 2:54 am US Treasury IBonds seem like a pretty good deal at the moment... Just wondering if there are any US expats on here who are using them... i.e. U.S. citizens resident outside the U.S.

They say quite clearly that U.S. citizens may own them whether they are resident in the U.S. or live abroad, but I'm just wondering if there are any pitfalls for non-residents to be aware of. For example mechanisms that inhibit easy online access to TreasuryDirect like IP geolocation blocking or SMS verification that only works on U.S. mobiles... similar to how many IRS electronic services don't work for U.S. citizens living abroad. Also, what is the tax-reporting (U.S) like... I assume it is easy?
What would the tax jurisdiction in do with them as treatment. I imagine that the accretion resulting for inflation could get taxed on an accrual basis? i.e. not when redeemed?
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HueyLD
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Re: Treasury IBonds for non-resident US-citizens

Post by HueyLD »

occambogle wrote: Thu Sep 22, 2022 2:54 am US Treasury IBonds seem like a pretty good deal at the moment... Just wondering if there are any US expats on here who are using them... i.e. U.S. citizens resident outside the U.S.

They say quite clearly that U.S. citizens may own them whether they are resident in the U.S. or live abroad, but I'm just wondering if there are any pitfalls for non-residents to be aware of. For example mechanisms that inhibit easy online access to TreasuryDirect like IP geolocation blocking or SMS verification that only works on U.S. mobiles... similar to how many IRS electronic services don't work for U.S. citizens living abroad. Also, what is the tax-reporting (U.S) like... I assume it is easy?
Yes you will need a verifiable U.S. address.

“31 CFR § 363.11 Who is eligible to open a TreasuryDirect ® account?

Only an individual or an entity is eligible to open a TreasuryDirect account. In order to open a TreasuryDirect account, an individual or entity account manager must have a valid social security number (SSN), be 18 years of age or over, and be legally competent. An entity must have a valid SSN or employer identification number. The account owner must have a United States address of record and have an account at a United States depository financial institution that will accept debits and credits using the Automated Clearing House method of payment.”
Topic Author
occambogle
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Re: Treasury IBonds for non-resident US-citizens

Post by occambogle »

EddyB wrote: Thu Sep 22, 2022 4:33 am Not Ted, but without a US address, you may not be able to activate the account online because their system may not be able to verify your identity. There’s a form to complete for verification, requiring either notarization or a Medallion guarantee. https://www.treasurydirect.gov/pdf/rs/acctauth.pdf
HueyLD wrote: Thu Sep 22, 2022 6:59 am Yes you will need a verifiable U.S. address.
“31 CFR § 363.11 Who is eligible to open a TreasuryDirect ® account?
Only an individual or an entity is eligible to open a TreasuryDirect account. In order to open a TreasuryDirect account, an individual or entity account manager must have a valid social security number (SSN), be 18 years of age or over, and be legally competent. An entity must have a valid SSN or employer identification number. The account owner must have a United States address of record and have an account at a United States depository financial institution that will accept debits and credits using the Automated Clearing House method of payment.”
Thanks for that info. It's very confusing because their own website says:
Who may own an I bond?
Individuals
Yes, if you have a Social Security Number and meet any one of these three conditions:
United States citizen, whether you live in the U.S. or abroad
United States resident
Civilian employee of the United States, no matter where you live
To buy and own an electronic I bond, you must first establish a TreasuryDirect account.
So what is a "United States address of record" if one is a non-resident ??? What if you have a registered US voting address but never lived there and don't use that address for your banks?

The ability and ingenuity of the USG in actively preventing its non-resident citizens from utilizing its services without a US address, while somehow easily managing to hold them them accountable for any and all taxation without a US address... is really the gift that keep on giving...
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HueyLD
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Re: Treasury IBonds for non-resident US-citizens

Post by HueyLD »

Well, paying taxes to Uncle Sam is our duty as U.S. citizens and AFAIK U.S. is the only country that taxes its citizens on worldwide income regardless of their domicile.

TD is not for everyone and you are under no obligation to open an account there. Keep in mind that a few things will trigger the dreaded signature certification requirement and getting that overseas can be either impossible or very expensive (e.g. a few hundred dollars at an U.S. embassy).

No need to complain as you probably use the FEIE and FTC to avoid a good part of double taxation.
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occambogle
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Re: Treasury IBonds for non-resident US-citizens

Post by occambogle »

It was a semi-lighthearted comment out of frustration, it just seems there is always a double standard applied... but I don't want to hijack this with a political discussion. And I do genuinely appreciate the very useful info you have provided. For the record the only other country is Eritrea which applies a 2% flat tax but effectively has no means of enforcement. But moving on...

I'm genuinely confused what a "U.S. address of record" is... it appears to be defined as an address that you can legally receive mail. Though I've seen some people online say that a US embassy can notarize a foreign address, others saying they can't. Others say there is one company that can provide a "medallion signature" online over video that works but they charge a lot.

In any case, it all seems way too complicated to be worthwhile.... Again, I appreciate your info though.
EddyB
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Re: Treasury IBonds for non-resident US-citizens

Post by EddyB »

HueyLD wrote: Fri Sep 23, 2022 7:21 am Well, paying taxes to Uncle Sam is our duty as U.S. citizens and AFAIK U.S. is the only country that taxes its citizens on worldwide income regardless of their domicile.

TD is not for everyone and you are under no obligation to open an account there. Keep in mind that a few things will trigger the dreaded signature certification requirement and getting that overseas can be either impossible or very expensive (e.g. a few hundred dollars at an U.S. embassy).

No need to complain as you probably use the FEIE and FTC to avoid a good part of double taxation.
Treasury Direct’s recent change to accept notarized evidence rather than insist on a Medallion Guarantee, combined with the rise of remote notaries, has made the ID process a lot easier.

I’m not sure what makes for a need to complain (I know it won’t do any good), but anybody “outside” who is paying the NIIT (which cannot be offset by FTC) to shore up Medicare, knowing that Medicare offers no coverage outside the US, will feel justified in doing it.
mkalman
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Re: Treasury IBonds for non-resident US-citizens

Post by mkalman »

How do taxes work? Would a foreign country tax imputed interest like a zero coupon bond?

I would be concerned about being double-taxed if the foreign country taxes the imputed interest annually and the US tax is paid at maturity if it is too many years apart to claim a foreign tax credit.
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HueyLD
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Re: Treasury IBonds for non-resident US-citizens

Post by HueyLD »

EddyB wrote: Fri Sep 23, 2022 4:11 pm Treasury Direct’s recent change to accept notarized evidence rather than insist on a Medallion Guarantee, combined with the rise of remote notaries, has made the ID process a lot easier.
So far, only one form has been changed to allow notarization. https://www.treasurydirect.gov/pdf/rs/acctauth.pdf

However, plenty of issues still require a signature certification method that is difficult and/or expensive to obtain. The TD wheel moves SLOWLY.
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HueyLD
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Re: Treasury IBonds for non-resident US-citizens

Post by HueyLD »

mkalman wrote: Sat Sep 24, 2022 4:18 am How do taxes work? Would a foreign country tax imputed interest like a zero coupon bond?

I would be concerned about being double-taxed if the foreign country taxes the imputed interest annually and the US tax is paid at maturity if it is too many years apart to claim a foreign tax credit.
Every country has its own tax law/regs and you just have to do your own research.

If you cannot find the answer, you should not invest in U.S. savings bonds. The cost may outweigh the benefit.
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kramer
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Re: Treasury IBonds for non-resident US-citizens

Post by kramer »

I have a US address of record but I don't live in the US and I am a US citizen. I just decided TD was not worth the hassle and risk (risk of account getting locked or never off the ground), after seriously considering it for a few years. Also, the benefit went down significantly with the $10,000 buying limitation.

The reason I still follow these threads is that I will have to start cashing in some paper I-bonds that are due around 2029. I am not sure what I will do then but I think I will probably have to establish a TD account before then or else find a US bank that would let me cash them in in person. I will need to cash them in in 3 batches, I think, so the online alternative would be much easier. I figure to start the process at least a year before I need the TD account, as I anticipate possibly big hassles.

Back when we had negative real rates, I knew this was costing me some money. But TIPs are generally a much better deal now if you have somewhere besides a taxable account to hold them.
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