iDeCo for Americans and the FBAR

[konbinibento]

From what I have read on these forums, as an American, my only option with iDeCo is to put money into cash savings due to Mutual funds being treated as PFICs.

Is this still the case?

If that is my only option I will be opening an iDeCo cash savings account shortly. Which leads to my next question.

Does anyone have experience reporting their iDeCo account on the FBAR and is it necessary to report it on Form 1040 Schedule B as well?

I have filed the FBAR in the past but it was for a regular savings account where as with iDeCo you are not given a specific account number, Bank address, etc.

Any help/ information is greatly appreciated.

[TokyoWart]

I don't have an iDeCo yet but can help with the FBAR reporting. Because iDeCo is an individual account you would include it on your FBAR (which you must submit if your foreign accounts totaled more than $10,000 anytime during the year) and potentially on your tax return using Form 8938 (required when foreign assets are more than $50,000 at year end or greater than $75,000 at any time during the year). If the iDeCo is all in cash equivalents it might not have any interest/dividends for the year and there is a place on Form 8938 where you are reporting foreign accounts and you can check a box that it doesn't have any amounts to report on Schedule B or D for that account. If you had no interest or dividends then iDeCo (or any other account which didn't generate interest or dividends; this happens for almost all my bank accounts) never appears on Schedule B.

[konbinibento]

I don't have an iDeCo yet but can help with the FBAR reporting. Because iDeCo is an individual account you would include it on your FBAR (which you must submit if your foreign accounts totaled more than $10,000 anytime during the year) and potentially on your tax return using Form 8938 (required when foreign assets are more than $50,000 at year end or greater than $75,000 at any time during the year). If the iDeCo is all in cash equivalents it might not have any interest/dividends for the year and there is a place on Form 8938 where you are reporting foreign accounts and you can check a box that it doesn't have any amounts to report on Schedule B or D for that account. If you had no interest or dividends then iDeCo (or any other account which didn't generate interest or dividends; this happens for almost all my bank accounts) never appears on Schedule B.

So in summary: ( If not mistaken)

I can do the iDeCo only if I do cash savings!
I would then need to report it on the FBAR if/ when my accounts total more than $10,000 anytime during the year.
I would need to report on Form 8938 if/ when foreign assets are more than $50,000 at year end or greater than $75,000 at any time during the year.
I need to report on 1040 Schedule B only if interest or dividends are earned?


Sorry for repeating!! The last thing I want to do is to misinterpret or misunderstand something and create a complicated tax issue for myself!!

Thank you so much for taking the time to reply. I appreciate it!!

[TokyoWart]

I can do the iDeCo only if I do cash savings!

Or you can do funds if you are willing to go through the PFIC obstacle course

I would then need to report it on the FBAR if/ when my accounts total more than $10,000 anytime during the year.

You have to include the iDeCo on your FBAR along with all of your other foreign accounts if the total of those foreign accounts (not just iDeCo) ever exceed $10,000. (Probably what you are stating but just wanted to be sure.)

I would need to report on Form 8938 if/ when foreign assets are more than $50,000 at year end or greater than $75,000 at any time during the year.

Yes!

I need to report on 1040 Schedule B only if interest or dividends are earned?

Yes!

[konbinibento]

I think I'll avoid PFICs for now.

Yes, I would report iDeCo in addition to all my foreign accounts.
And I will continue submitting Schedule B, only Part 3 unless I actually earn interest or dividends.

Thank you so much for the help!! Have a great weekend!

[SeaDaddy]

Hello, American here. I am trying to navigate this ideco and fbar stuff and was hoping to get some advice.

I have been in ideco for a while now with a 12000 yen a month investment. My Japanese wife put me into it. I just recently found out about this FBAR thing which lead me to here and the whole PFIC discussion surrounding Americans and foreign investments. (Think of me as a complete moron when it comes to investing or money in general!)

I think at this point I just have to remain in ideco and try to make the best of it.

My question is if I can change my ideco to cash in order to avoid the PFIC thing? If so, what are the Japanese terms for doing this? As in, what are the actual words used for Cash account or mutual fund account?

Thank you for any help or advice!

[Haystack]

The ideco offerings and mechanics are slightly different with each institution. Where is you iDeco?

1. Uninvested funds in many iDecos are in a simple MMF by default.

2. Some iDecos offer term deposits. Which is a good option for Americans 10 or so years out from retirement who want to use iDeco to reduce their taxes /an-or/ as a bond alternative.

............

You probably want to sell out now imo and keep it in cash. Reevaluate contributing.

[SeaDaddy]

I am in Rakuten ideco.

I thought you can't back out of an ideco once you're in?

[captainspoke]

I'm puzzled. On the instructions for form 8938, I see amounts that are greater than specified in comments above:

Taxpayers living outside the United States. If your tax home is in a foreign country, you meet one of the presence abroad tests described next, and no exception applies, file Form 8938 with your income tax return if you satisfy the reporting threshold discussed next that applies to you.

Unmarried taxpayers. If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.

Married taxpayers filing a joint income tax return. If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

Married taxpayers filing separate income tax returns. If you are married and file a separate income tax return from your spouse, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.

https://www.irs.gov/instructions/i8938

[Haystack]

I am in Rakuten ideco.

I thought you can't back out of an ideco once you're in?

You can sell or buy funds, but the money stays inside until you reach retirement age.

Looks at the list of products Rakuten ideco offers -> https://dc.rakuten-sec.co.jp/service/product/#skip02_01

定期預金/Time deposit -

This should be fine for Americans. Probably slightly better than keeping it in the MMF.

Enjoy those rates - https://dc.rakuten-sec.co.jp/pdf/kinri01.pdf