FATCA Exempt?

[expat2011]

Hey there Retire Japan. Sorry if this is the not place to post this- I was not sure if it goes here or in "Banking."

I have Charles Schwab Investor Checking, and I am a US citizen living full-time in Japan. Investor Checking does not support international addresses, but when I called Customer Service to talk about it, they said I could just switch my account to an "international" account and it would be pretty much the same but with my actual address in Japan. Sounds good.

The thing is, they recently contacted me to say that I did not complete one part of the application. (I thought I didn't have to.) Part of the section says:

"(4) I am exempt from Foreign Account Tax Compliance Act (FATCA) reporting."

Uh... what? A brief search makes it look like FATCA reporting applies to US citizens with foreign investments- something like $50,000 is where the requirement kicks in.

It looks normal for FATCA to be required of all US citizens. It doesn't apply to me (yet) because I don't have any foreign investments but... It could in the future. Does this sound weird? Can I honestly sign that section? Because I don't have any investments, hence no FATCA, but that could change in the future.

Any advice would be appreciated.

[expat2011]

Small update: So actually it seems like the reporting threshold is:

https://www.ustaxhelp.com/needs-report- ... ets-fatca/

"filing a non-joint return for assets with an aggregate value:

Exceeding $200,000 on the final day of the year to be reported.
Exceeding $300,000 at any point during the year to be reported.

If you are filing a joint return with your spouse, the financial threshold is higher:

Over $400,000 on the final day of the year to be reported.
Over $600,000 at any point during the year to be reported."

So, since I'm currently at $0, it seems like I'm definitely exempt but... Does that part of the agreement sound weird to anyone else?

[StockBeard]

My concern would be why being exempt of FATCA is something Schwab wants you to check. Is that a condition for them to accept you as a client oversea? Does that mean that ultimately, when you'll own more than 20M Yen in Japan, you'll need to do FATCA reporting and Schwab will close your account? Is it a value you can update any time you want with an email to them? ("Hi Schwab, I now need to report for FATCA, so please update your entry")
I'd try to clarify that with them if possible.

Side question, does the conversion of your account to an international account limit what you can do with the account? Initially you wanted this for a checking account, does the international version still meet your needs? For example I know that when I converted my Schwab brokerage account to an international one, this prevented me from buying/selling mutual funds.

As much as I love Schwab as a client of theirs, back in 2012 they closed my account overnight with the only reason being "you live in Japan and we stopped doing business with Japan". I had to fight to get my account reopened and I don't feel super confident it won't happen again. Having this sword of Damocles over my head is very uncomfortable. (note that I'm not a US citizen so my situation - in particular related to FATCA - is very different from yours so I can't help much)

[expat2011]

Thank you very much for your thorough reply.

You were thinking the exact thing I was thinking, which I also asked the customer service rep on the phone, "So does this mean if I ever need to file FATCA (go above $200,000 in foreign investments), I also need to call and close this account? Does this mean every US citizen with your international account has less than $200,000 in overseas assets?" The guy did not really have an answer.

I called the IRS, who basically said, "you're right, you're not exempt, but you also don't need to file if you don't meet the thresholds."

This portion of the Schwab application is titled "W-9 Substitute," so the IRS suggested I just ask Schwab if I can file an official W-9 form and just not claim any exemptions. I may do that.

But your position also worries me. Basically I just use this account to pay my US credit card and occasionally write or cash birthday checks. I don't have any investments with Schwab.

I really wouldn't mind switching banks. All I need is checking. I just don't know where to go...

(Apologies, I do recognize this has become a bit of a cross-post, but it is about both taxes and banking.)

[captainspoke]

...
...Basically I just use this account to pay my US credit card and occasionally write or cash birthday checks. I don't have any investments with Schwab.

.... All I need is checking. ...

This may be part of the reason why they don't value you. You're using them, instead of them gaining any value from you.

For example, shinsei recently changed its ATM fee structure so that customers who liked the fee-free ATM use, but who also only maintained a low balance (and didn't use other services) would now have to pay ATM fees. From the reaction, it seemed the world was coming to an end.

Good luck with finding something else.

*

As an aside, if you're US and investing abroad, please read up on PFICs and tremendous headaches and tax obligations those can cause.

[expat2011]

Final summary: I asked Schwab if it was OK to just submit an official IRS W-9, and they said sure. I did so and did not claim any exemptions. Problem solved.

More details here: viewtopic.php?f=2&t=1129&p=10864#p10864

[adamu]

shinsei recently changed its ATM fee structure so that customers who liked the fee-free ATM use, but who also only maintained a low balance (and didn't use other services) would now have to pay ATM fees. From the reaction, it seemed the world was coming to an end.

Obviously it's their choice to do what they want, but personally I think it wasn't a good decision.

- It was something unique to them that no other services provided
- It worked as a loss-leader which would convert some loyal customers to profitable ones.

I was definitely one of those "just use the free ATM" people when I first moved to Japan. In fact, I switched from the local bank to them because of ATM fees. But when they introduced fees, I switched away (to SBI). Now I have a large cash float, pay in my salary, use their investment platform... and I hardly even use an ATM. Their loss. Although it was a slightly knee-jerk reaction from me, because SBI don't have condition-free free ATM withdrawals either. I just felt like Shinsei was going the wrong direction, and SBI was going the right direction.

But they have the numbers - maybe it was just wasn't worth it for them. I think what actually happened is that they changed their vision a few years ago and are now just another bank. They used to provide English investment accounts too I believe, but that hasn't been the case for years either.