Brokerage Firms US Expats

[jmsthailand]

Hi all. I know this topic comes up from time to time on ThaiVisa. I'm debating whether to continue to use US brokerage accounts with VNP etc. or move elsewhere. I'm a digital nomad US expat unofficially living in Thailand but coming in and out on tourist visas and travelling around the place (like many). I already have a number of US brokerage accounts where I use my parents' address in the US, which I can continue to do if necessary.

 

However, I've heard horror stories of people's accounts being closed because they moved abroad. I know some people have moved to sites like Interactive Brokers with a Thai address, but for me, I'm neither resident of the US or Thailand, so that's an equally grey area. IB also seem to have much higher fees (RobinHood, Webull etc. are free in US). I'm thinking I'll probably just stay with a number of US firms, keep my US address, hope for the best and use a VPN. Can't see how they would know I'm not resident in the US anyways seeing as they're all brokerage accounts and not tied to bank cards that I use. And I only transfer between US banks.

 

My main concern is about tax returns. If brokerage firms are issuing 1099s with your US address on them, I wonder if that could risk your losing the Foreign-Earned Income Exclusion with the IRS, given your actual tax returns are going to have your Thai address. Or could it be problematic if you have to file a W9 and use your US address? I also worry a bit about using a Californian address from my parents in case that drags in also the state tax authorities who start saying I'm a resident there or should be paying taxes on dividends/capital gains even as a non-resident on California-sourced income.

 

Anyone have any experience/advice? Ever run into problems with the the Foreign-Earned Income Exclusion using your US address with US brokerage firms etc.?

Edited January 5, 2020 by jmsthailand

[Jingthing]

This is a complex issue and it gives me a headache. I've been a fake U.S. resident for several years with multiple firms. I was forced to switch to U.S. logins. It's important to have a U.S. phone number and also a way to get two factor authentication texts. Google voice doesn't always work. In my experience the most obnoxiously aggressive anti-expat brokerage is Fidelity. You might want to setup a Schwab account before you leave, but I wouldn't tell them you're living abroad either, they do seem to have a friendlier to expats reputation though. Capital One (also faking your U.S. address) gives a no exchange fee debit card I think but you would want to stay a fake U.S. resident with them as well.

Also keep in mind these issues are a moving target. What has worked might not work later.

[jmsthailand]

18 minutes ago, Jingthing said:

This is a complex issue and it gives me a headache. I've been a fake U.S. resident for several years with multiple firms. I was forced to switch to U.S. logins. It's important to have a U.S. phone number and also a way to get two factor authentication texts. Google voice doesn't always work. In my experience the most obnoxiously aggressive anti-expat brokerage is Fidelity. You might want to setup a Schwab account before you leave, but I wouldn't tell them you're living abroad either, they do seem to have a friendlier to expats reputation though. Capital One (also faking your U.S. address) gives a no exchange fee debit card I think but you would want to stay a fake U.S. resident with them as well.

Also keep in mind these issues are a moving target. What has worked might not work later.

Thanks, Jingthing. So no issues with tax liabilities for you because of being a "fake US resident" as you call it? I mean, you still just put your Thai address on tax returns and claim the Foreign-Earned Income exclusion? (I am assuming you are a tax-paying US citizen.)

[Jingthing]

1 minute ago, jmsthailand said:

Thanks, Jingthing. So no issues with tax liabilities for you because of being a "fake US resident" as you call it? I mean, you still just put your Thai address on tax returns and claim the Foreign-Earned Income exclusion? (I am assuming you are a tax-paying US citizen.)

I do file but that isn't an issue for me as I don't have any Thai income. 

I do use my address with the IRS.

People that choose to still file with a U.S. address are better off if their last state doesn't have state taxes.

If your does, you will want to divorce yourself from that state by filing a partial year state tax return during the leaving year.

 

[jmsthailand]

2 minutes ago, Jingthing said:

I do file but that isn't an issue for me as I don't have any Thai income. 

I do use my address with the IRS.

People that choose to still file with a U.S. address are better off if their last state doesn't have state taxes.

If your does, you will want to divorce yourself from that state by filing a partial year state tax return during the leaving year.

 

I see what you mean for your case. I've never actually been a resident of the US myself, just that I have a US passport and my family's address. I always use my Thai address on my tax return as I have foreign-earned income I can exclude there. I don't think I should be tax liable with state/federal authorities just by using a Californian address on my brokerage accounts, but it's so hard to know with these things. I think the IRS just care what address you put on the return. I suppose you could get in trouble with the brokerage firm, but probably worst that can happen is they close your accounts and you have to move the assets elsewhere. As you say, it gives you a right old headache!

 

This is an interesting article here about it, suggesting you just don't ask, don't tell: https://www.taxesforexpats.com/articles/investments/what-to-do-if-your-us-broker-wants-to-close-your-investment-account-when-you-live-overseas.html

 

They claim, "There is no law requiring you to inform your broker of your physical residence. They ask from you a mailing address - which is what you can provide." I'm not sure if that's true honestly, because when I've signed up in the past, I'm pretty sure it says "residential address."

[Jingthing]

There are definitely a lot of grey areas (and games people often feel they need to play) for U.S. expats that still maintain ties to financial accounts, credit cards, etc. in the U.S. 

Then the fun really begins when you're called for jury duty!

I definitely agree with the philosophy of not volunteering information that can be used against you to financial firms.

However, in some cases (definitely Fidelity) they aggressively try to smoke out expats to the point of trying to get them to confess and researching their social media accounts. 

Edited January 5, 2020 by Jingthing

[jmsthailand]

3 minutes ago, Jingthing said:

There are definitely a lot of grey areas (and games people often feel they need to play) for U.S. expats that still maintain ties to financial accounts, credit cards, etc. in the U.S. 

Then the fun really begins when you're called for jury duty!

I definitely agree with the philosophy of not volunteering information that can be used against you to financial firms.

However, in some cases (definitely Fidelity) they aggressively try to smoke out expats to the point of trying to get them to confess and researching their social media accounts. 

I'll stick clear of Fidelity. I suspect a lot of these newer trading platforms like Etoro/Webull/Robinhood don't have the manpower or budget, given their low or zero fees, even to investigate.

[ChouDoufu]

fidelity somehow figured out i was living in thailand.  might have been the link to bangkok bank in new york, the swift transfers...who knows.

 

they did NOT close my account, but they restricted it such that i could no longer purchase mutual funds, for sale in the us only.  i could keep the ones i had, still have dividends reinvested, just no new purchases.

all other options open....etf's, bonds, stocks.

was told to visit any fidelity office in the usa and they'd remove the restriction.

 

i use a relative's mailing address in virginia to receive things like new debit cards, not as a tax base.  that's still officially in texas.

 

other than the mutual fund restriction, fidelity is fine.  now they've dropped all trading fees for etf's, and offer free swift transfers.

 

foreign address on the tax return really means nothing other than a contact address.  not sure the 1099 address is important.  haven't seen a paper version of mine in a decade.

[jmsthailand]

That's interesting. Were you using a VPN or browsing with a Thai IP address? My plan is to keep all my brokerage accounts totally separate from my Thai accounts. If I need to transfer something, I'll just transfer first to my main US current account, and then out of there.

 

Foreign address is important if you have employment or self-employment income as you need to establish a tax home in the foreign country to qualify for the 100,000$+ dollar Foreign-Earned Income Exclusion. I really have no idea whether a different address on a 1099 compared to what you put on your tax return has an impact on that though.

[ChouDoufu]

my filing address is just where i happen to be living when i do the filing.

 

i use my thai address for filing, my chinese employer for income, and my tax homes are listed as both thailand and china.

[jmsthailand]

20 minutes ago, ChouDoufu said:

my filing address is just where i happen to be living when i do the filing.

 

i use my thai address for filing, my chinese employer for income, and my tax homes are listed as both thailand and china.

For the FEIE you definitely need a foreign address in the sense somewhere you are actually living in a foreign country so you can establish your tax home there. Maybe, you could just write e.g. Bangkok, Thailand on the 2555 form and then use a US address everywhere else on your tax return, both for the name of you doing business as a self-employed individual, for example, and on Form 1040. Bear in mind though it does say "home address" on the 1040.

 

My guess is while it's possible to use a US address on everything except the "tax home" on Form 2555, the IRS is going to start to get suspicious if all your documentation and 1099s being filed with them have a US address, even though you claim to have a foreign tax home. It's probably not enough to disallow the FEIE, but it might be enough for them to audit you, which would be a massive pain of course. So I guess it's a risk.

 

Answering my own question here, but I took a closer look at the 1099 forms, and I don't think they put much emphasis on that in and of itself. It just says in the W9 instructions: "Enter your address (number, street, and apartment or suite number). This is where the requester of this Form W-9 will mail your information returns." No mention of that having to be your actual residential address.

 

Long story short, I think probably the IRS situation is no big deal (as long as you're filing properly and paying tax). So it basically comes down to if the brokerage firm finds out you're living abroad.

 

[mshs]

5 hours ago, jmsthailand said:

Thanks, Jingthing. So no issues with tax liabilities for you because of being a "fake US resident" as you call it? I mean, you still just put your Thai address on tax returns and claim the Foreign-Earned Income exclusion? (I am assuming you are a tax-paying US citizen.)

The Foreign Earned Income Exclusion IS $106,000 for 2020.  Nomads do not make that kinda money, much less choose to live in the 3rd world. 

In the unlikely event that your brokerage account gives off that kinda money in dividends, I would suggest non-dividend paying stocks such as BRK-A, (or B), PYPL, FB, GOOG, AMZN and such.

[Why Me]

The OP should not worry about different addresses on the 1040, 2555 and 1099. There is no reason why a person can't have multiple residences.

 

E.g., now that I have sold my home in the US, I write my Thai address on the 1040 and 2555 (as the place where I stay more than 330 days a year to claim FEIE). My Fidelity ac. however was opened with my brother's US address. So obviously the 1099 which the IRS sees has a US address.

 

Another case, once way back when I was working in the US and had a home there, I spent a years sabbatical in Germany. So for that year 1040 = US address, 2555 = German address, 1099 = US.

 

No issues in either case - in fact, I  have been filing from Thailand for 10 years. Which is as it should be because a person can perfectly reasonably have a US residence X but spend N days in the year at residence Y in another country. In fact, a brokerage ac. could be opened from a second US address so conceivably all 3 addresses 1040, 2555, 1099 could be different.

 

What is more worrying  though are restrictions on expat brokerage acs. I do use my brother's address with Fidelity but have been totally open with them the few occasions that I have called them that I live/work in Thailand and use my Thai IP as well to buy/sell there. So far no problems at all.

 

I have been thinking of updating to my Thai address with Fidelity. Maybe I'll call them next week and ask how that might impact my account.

 

[ChouDoufu]

4 hours ago, mshs said:

The Foreign Earned Income Exclusion IS $106,000 for 2020.  Nomads do not make that kinda money, much less choose to live in the 3rd world. 

In the unlikely event that your brokerage account gives off that kinda money in dividends, I would suggest non-dividend paying stocks such as BRK-A, (or B), PYPL, FB, GOOG, AMZN and such.

in addition to the FIE, you also have the $12,000 standard deduction for single filers, and up to ~$40,000 in long-term capital gains is taxed at the 0% rate.

 

 

as to address on tax forms:

 

my former us address (home in texas sold, but still last registered address for voting purposes), and my relative's address in virginia (used solely for receiving mail).......neither of these appear on any of the irs forms that i file.

 

irs has access to 1099's but those are not part of the filing package.

 

filed FBAR a few days ago using china address to report thai and chinese accounts.

 

not sure what us address would be appropriate......haven't been in the us in over 15 years.

[Langsuan Man]

11 hours ago, Jingthing said:

In my experience the most obnoxiously aggressive anti-expat brokerage is Fidelity. You might want to setup a Schwab account before you leave, but I wouldn't tell them you're living abroad either, they do seem to have a friendlier to expats reputation though

Jing you are spot on with Fidelity.  If a CSR even suspects that you are overseas they will require you to answer several "travel related" questions, if you refuse to answer them, you will be blocked from trading with Fidelity.  They will allow you to continue to trade equities but no Mutual funds.  No appeal, once they hit that button you are blocked.  I moved my full IRA over to Schwab as a result.  Not that I was gong to trade in Mutual funds, since I am now a seller, not a buyer, but the whole experience turned me off to Fidelity.  Sad because they made me an awful lot of money over the years but this absurd over enforcement of "know your customer" was a bridge too far

 

Before transferring everything over to Schwab I had a long discussion with one of their senior CSR's who basically told me that they are not trying to "find" their customers who may be overseas, and will only say something if it appear suspicious and even then they would work with the customer before banning them from trading.  He thought my checking with Fidelity on the status of an domestic EFTS certainly would not cause Schwab to lower to boom in the same circumstances, especially since there was no evidence that I was overseas other than my refusal to answer "travel" questions. 

 

The only time I will let anyone know where I am located is when I need to use their ATM or Credit Card, (if overseas) otherwise forgettta about it 

[Nyezhov]

My Kid has the same issue. Some of the things we do to solve the problem is:

 

1. She maintains a US address and phone number.

2. She will return to the USA every 2 years or so.

 

Of course, when I kick, she undoubtably will not come back at all. So we use a series of trusts to control her accounts, and all the trusts are in the USA. Some she is trustee, some she is beneficiary and the trusts also own corporations that "employ" her. She is free to spend her own earnings as she likes (all her living expenses are covered now) while all the investing is done in the USA. 

 

Easy peasy. The Kid has it made. It made my heart swell with misoplaced pride to see her drop $700 in Sephora in one two hour binge. 

[cmarshall]

The only solution to the US brokerage problem is to setup accounts with multiple brokers before leaving so that if one of them closes you out, you can move the assets to another.  Then you need a US phone number, a mail forwarder, and a vpn service.

 

So far that works for me, but the situation will continue to change for sure.

[OneZero]

I assume there must be some USG regulation (?) requiring this.  But whatever the reason, what is the underlying rationale for the requirement?

[Jingthing]

1 hour ago, cmarshall said:

The only solution to the US brokerage problem is to setup accounts with multiple brokers before leaving so that if one of them closes you out, you can move the assets to another.  Then you need a US phone number, a mail forwarder, and a vpn service.

 

So far that works for me, but the situation will continue to change for sure.

Yes in general I agree. 

I opened an absurd number of U.S. accounts before leaving the U.S. and even a few with U.S. identity after using fun methods. 

But the downside of that is that it's a major pain keeping track of all those accounts and some have become dormant/closed because I just wasn't up to it.

I eventually decided I needed a SDFCU account as the ultimate backup because they accept open expats.

There always is Interactive Brokers which will also accept trading and retirement accounts for open expats but I haven't opened with them yet. Yes, higher fees if you're account goes under a certain level and clearly a culture of catering to quite sophisticated investors and I'm not that sophisticated.

 

I will add if you're trying to get money OUT of Thailand SDFCU isn't good. They don't even have a SWIFT code and they are not on the DeeMoney list of U.S. banks set up to send money to. 

 

 

 

Edited January 6, 2020 by Jingthing

[Pib]

3 hours ago, Jingthing said:

 

 

I will add if you're trying to get money OUT of Thailand SDFCU isn't good. They don't even have a SWIFT code and they are not on the DeeMoney list of U.S. banks set up to send money to. 

 

 

[Jingthing]

7 minutes ago, Pib said:

 

 

Thanks. When I signed up with them they definitely told me they don't have a SWIFT code. 

 

So that sounds like good news that you posted.

 

However I'm confused about their description as Bic / SWIFT. 

 

So is that  code the same as a normal SWIFT code or something different? 

[Pib]

11 minutes ago, Jingthing said:

Thanks. When I signed up with them they definitely told me they don't have a SWIFT code. 

 

So that sounds like good news that you posted.

 

However I'm confused about their description as Bic / SWIFT. 

 

So is that  code the same as a normal SWIFT code or something different? 

 

SWIFT...BIC....same-same

https://en.wikipedia.org/wiki/ISO_9362

https://transferwise.com/gb/blog/what-are-bic-swift-codes-guide

[Pib]

https://sdfcu.org/banking-services

[jmsthailand]

Thanks for the useful comments, guys. I really appreciate it! Good to know IRS different addresses are not an issue. I think I'm going to just keep my US brokerages and spread the investments widely over different accounts.

 

Since everyone's been so helpful, I thought I might share my own experiences with the VPN issue. Not all VPNs are the same. Most are easily detectable if a company wants to. I use a so-called residential, dedicated, static-IP VPN. Most VPNs are easily identifiable as "network shared devices." Residential IPs are actually registered to US ISPs vs datacenter VPNs, which comprise the vast majority of commercial VPNs. So, basically, for all intents and purposes, you appear to any website as an actual person in the US in your home.

 

If you want to really safeguard yourself, then you can get a static residential IP. That means that the IP won't be constantly changing, which could also be a red flag with companies (e.g. brokerages). Finally, if you wanted to go all out, you can also get a dedicated VPN with all of the above capabilities. That would mean that only you are using it. Not having a dedicated VPN could also be red flag in case people are logging into the same site as you at the same time or potentially doing nefarious things on the same IP you're using.

 

The only downside to residential, dedicated, static-IP VPN is that they are much more expensive than normal VPNs, which are often free. I personally use TorGuard, but there are other options too.

Edited January 6, 2020 by jmsthailand

[mshs]

2 hours ago, jmsthailand said:

Since everyone's been so helpful, I thought I might share my own experiences with the VPN issue. Not all VPNs are the same. Most are easily detectable if a company wants to. I use a so-called residential, dedicated, static-IP VPN. Most VPNs are easily identifiable as "network shared devices." Residential IPs are actually registered to US ISPs vs datacenter VPNs, which comprise the vast majority of commercial VPNs. So, basically, for all intents and purposes, you appear to any website as an actual person in the US in your home.

Don't see why you are so hung up on VPN.  If that is an attempt to hide your location from the brokerage and the brokerage assumes it is US and does/does not report to the IRS, that is all for nothing!

 

Presumably, you are trying to deny them the opportunity to prove your residence/your domicile.  Even if they had the tech to trace the VPN (which they and the likes of the NSA might), they will not.  Because once you get on the wrong side of Uncle Sam and despite the praying/hoping you got caught, you are guilty until proven innocent. 

  

 

Edited January 6, 2020 by mshs

[Jingthing]

The VPN thing is about financial institutions figuring out you live abroad. Not about IRS. U.S. financial institutions in the U.S. have a know your customer mandate and most don't really want expat accounts.

[Jingthing]

On the tax residence thing --

 

 

[OneZero]

8 hours ago, Jingthing said:

The VPN thing is about financial institutions figuring out you live abroad. Not about IRS. U.S. financial institutions in the U.S. have a know your customer mandate and most don't really want expat accounts.

But why? I'm sure there is a valid reason, at least from their perspective.  What is it?

[Langsuan Man]

54 minutes ago, OneZero said:

But why? I'm sure there is a valid reason, at least from their perspective.  What is it?

"Know your customer" provisions of the Dodd-Frank Finance Regulation Law.  So banks don't want to have to deal with proving foreign Identification so they discourage foreign customers.  A few like Schwab open up foreign subsidiary's to get that business , yet I think Schwab just closed their Singapore office 

[Jingthing]

Also if you ask your specific financial institutions about their expat policy if they are hostile which is more common than not then you have more or less confessed.