Brokerage Firm for Stocks and IRA's American; Schwab wants to disown me for being Expat.

[TallGuyJohninBKK]

On 1/1/2023 at 9:10 AM, wasabi said:

I recently had the same issue as the OP with my Schwab account where they began asking for a physical Us address. For years I used a virtual mailbox address with no problem but it does seem they are catching up on that now perhaps due to the TD merger that's coming up.

 

Was it your Schwab brokerage or bank account that was frozen and/or where the U.S. physical address request arose?

 

[TallGuyJohninBKK]

On 1/1/2023 at 11:02 AM, skatewash said:

To those that need to prove that they "reside" at their US mailing address here is possibly something to try.  The IRS will snail mail a copy of the transcript for your last tax return filed to your US mailing address.

 

Skatewash, I wonder, is doing the IRS mailed transcript route you mention any different/better than just providing the bank/brokerage a copy of your most recent IRS tax return filing, which hopefully is using the person's U.S. mailing/residence address?

 

But when banks and FIs get hinky about these kinds of things, they usually seem to ask for things that are specifically residency based -- such as home utility bills, home insurance policy, home phone bill, etc etc. Perhaps voter registration as well.

 

 

[skatewash]

4 hours ago, TallGuyJohninBKK said:

 

Skatewash, I wonder, is doing the IRS mailed transcript route you mention any different/better than just providing the bank/brokerage a copy of your most recent IRS tax return filing, which hopefully is using the person's U.S. mailing/residence address?

 

But when banks and FIs get hinky about these kinds of things, they usually seem to ask for things that are specifically residency based -- such as home utility bills, home insurance policy, home phone bill, etc etc. Perhaps voter registration as well.

 

 

Not sure, I haven't personally faced threats of closing or restricting my US financial accounts yet.  It might be helpful to show the IRS has your US (mailing) address.  The fact that an envelope addressed to your US mailing address was sent from the IRS at least recognizes the fact that the IRS knows your mailing address.  But you're probably right that there are more specifically residence-based things that they are looking for.

[wasabi]

5 hours ago, TallGuyJohninBKK said:

 

Was it your Schwab brokerage or bank account that was frozen and/or where the U.S. physical address request arose?

 

I have a Schwab One account which is both a checking account and a brokerage account.

Edited January 2, 2023 by wasabi

[mooping20Baht]

what is the actual law, that a US citizen, must reside in the US to trade US funds/stocks? just curious.

 

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what does a company like Vanguard have for a policy ? Do they have a method to retain services, if a mail forwarding company became insufficient as an address in the US?

 

 

[EVENKEEL]

2 minutes ago, mooping20Baht said:

what is the actual law, that a US citizen, must reside in the US to trade US funds/stocks? just curious.

 

------

what does a company like Vanguard have for a policy ? Do they have a method to retain services, if a mail forwarding company became insufficient as an address in the US?

 

 

I have Vanguard for one fund. I wanted to park some savings with them, didn't talk about my fund. I talked too much about spending time in Thailand and they refused me for new account.

[skatewash]

7 hours ago, mooping20Baht said:

what is the actual law, that a US citizen, must reside in the US to trade US funds/stocks? just curious.

 

------

what does a company like Vanguard have for a policy ? Do they have a method to retain services, if a mail forwarding company became insufficient as an address in the US?

 

 

This article give some insight into some of the potential liability issues that US financial institutions face when dealing with customers who are non-residents of the US:

https://www.fool.com/knowledge-center/can-foreign-investors-buy-us-mutual-funds.aspx

Also:

https://roundtablewealth.com/resources/american-expat-brokerage-accounts/

These two articles describe the risk calculus US financial institutions are dealing with.  Instead of there being a black-letter law that restricts US non-residents there are liability concerns for a company having US non-residents as customers.  So instead of all US financial institutions reaching the same conclusion as one would expect in reaction to a specific law you see different US financial institutions envisioning labilities with continuing to service US non-resident customers and making different policy decisions in reaction.

Edited January 4, 2023 by skatewash

[mooping20Baht]

hmm, so, for example, if someone did frequent trading as a living, then the country (different than their citizenship), which has a foreign address, might flag them as "doing business" without a business visa or so.

and/or the foreign country would expect to tax the income of the trading, and the persons home country brokerage, would not be in compliance, by not withholding some of the income tax ?

 

too bad there isn't a accepted solution, isn't of bearing the risk

[Alotoftravel]

If usa govt can still tax us as non us residents , I think financial Banks can let us bank with them to pay our yearly taxes abroad . It is difficult to pay usa govt in Thai bhat 5555

[biervoormij]

@IAMHERE Can you give us an update on how your conversation with Charles Schwab went? Were they happy with your Brother In Law's address or are they still planning on closing your account?

[IAMHERE]

On 1/5/2023 at 8:25 PM, biervoormij said:

@IAMHERE Can you give us an update on how your conversation with Charles Schwab went? Were they happy with your Brother In Law's address or are they still planning on closing your account?

I gave them the same BIL addy/phone-nbr as I'd done before retiring overseas. They took the repeated info, said they'd send it along to whoever, and haven't heard further. I did practically empty out the checking account and will go ahead and try to jump thru the hoops to open an Interactive Brokers account. Changed my direct deposit to Bangkok Bank. I fully expect Schwab to just sell everything and send my a check to BIL address. FATCA(terrorist,tax cheats, drug kingpins) and Patriot Act (911 results) are to blame. 

[jaywalker2]

On 12/30/2022 at 11:34 AM, JimGant said:

My traditional IRA is with Schwab, and my address on record with them is my Thai address. The only downside of not having a US address is that I can't trade online, as I found out last year when I tried to sell some shares in the IRA account to cover my RMD (required minimum distribution). Instead, I had to call their international number and do the trade via phone. And I had to pay $25 for the inconvenience of not being allowed to trade online, again, due to having a foreign address.

 

Is that only for trading in an IRA or is for all online trading?

[jaywalker2]

On 1/4/2023 at 8:49 AM, mooping20Baht said:

hmm, so, for example, if someone did frequent trading as a living, then the country (different than their citizenship), which has a foreign address, might flag them as "doing business" without a business visa or so.

and/or the foreign country would expect to tax the income of the trading, and the persons home country brokerage, would not be in compliance, by not withholding some of the income tax ?

 

too bad there isn't a accepted solution, isn't of bearing the risk

If you're working in a foreign country, it's my understanding that tax compliance is up to the individual not the company you might be working for or the brokerage.  When I was working in Japan, for instance, Japanese companies had nothing to do with U.S. tax laws. There was an information sharing agreement between the U.S. and Japan but in general that was only relevant in the case of audits. You weren't allowed to hold U.S. mutual funds sold in Japan however.

[JimGant]

8 hours ago, jaywalker2 said:

Is that only for trading in an IRA or is for all online trading?

Makes sense that if trading mutual funds held in an IRA are restricted, then trading mutual funds outside an IRA would also be subject to the same restrictions, if your address is foreign. ETFs and individual stocks, I believe, have less restrictions.

[TallGuyJohninBKK]

1 hour ago, JimGant said:

Makes sense that if trading mutual funds held in an IRA are restricted, then trading mutual funds outside an IRA would also be subject to the same restrictions, if your address is foreign. ETFs and individual stocks, I believe, have less restrictions.

 

AFAIK, if an American is living overseas, all purchases of U.S. mutual funds are not allowed, whether it's via an IRA account or any other brokerage account.

 

AFAIK, that restriction on U.S citizens living abroad only applies to mutual fund purchases and not other kinds of U.S. investment holdings.

 

 

[TallGuyJohninBKK]

I should have clarified above, meant to say, living overseas AND giving/using a foreign address with their brokerage account.

 

If you're living abroad and using a U.S. address of record on your U.S. brokerage account, then the mutual funds issue should not arise.

 

[riclag]

On 1/18/2023 at 8:58 AM, IAMHERE said:

I gave them the same BIL addy/phone-nbr as I'd done before retiring overseas. They took the repeated info, said they'd send it along to whoever, and haven't heard further. I did practically empty out the checking account and will go ahead and try to jump thru the hoops to open an Interactive Brokers account. Changed my direct deposit to Bangkok Bank. I fully expect Schwab to just sell everything and send my a check to BIL address. FATCA(terrorist,tax cheats, drug kingpins) and Patriot Act (911 results) are to blame. 

@IAMHERE I looked at the thread

and I didn’t see any mention of using a travel notice! Out of curiosity have you used the travel notice?(I use it every year).

You also mentioned you have been with them for 27 years. How many years in Thailand ?

 

I have a checking and brokerage account with them ( since 2019)while using a USA

address. I never use them for wire transfers ! I use other banks for that. I strictly use them 2x monthly for the atm.

 

Side notes,back in 2016 my Merrill edge account was canceled on me because I made a transaction (trade) from out of the country even though I asked the agent if it was ok.

You might want to ask Schwab if you can actively make trades while  visiting a different country ,just for peace of mind.

I use a Thai address for the IRS . SS has my USA address ,while depositsgo to a usa bank.

I have a usa phone# on file with my usa banks.

 

Sad to hear they discovered this especially . 25k in a Schwab account  just to be able to use there services is a stretch but doable I suppose.

 

 

 

 

Edited January 19, 2023 by riclag

[OneZero]

23 hours ago, TallGuyJohninBKK said:

 

AFAIK, if an American is living overseas, all purchases of U.S. mutual funds are not allowed, whether it's via an IRA account or any other brokerage account.

 

AFAIK, that restriction on U.S citizens living abroad only applies to mutual fund purchases and not other kinds of U.S. investment holdings.

 

 

Out of Curiosity--What might be the USG claimed rationale for that dichotomy?

[Jingthing]

8 hours ago, OneZero said:

Out of Curiosity--What might be the USG claimed rationale for that dichotomy?

Sounds like from an abundance of caution.

Can Foreign Investors Buy U.S. Mutual Funds? | The Motley Fool

Why US Brokerage Accounts of American Expats are Being Closed (creativeplanning.com)

[tgw]

I think there should be a law against terminating accounts in good standing of nationals just because they reside abroad.

the due diligence involved - and that's the reason why banks want to close these accounts - is or should be normal business for any bank.

they choose to be lazy and cut on costs.

[tgw]

On 1/18/2023 at 1:57 PM, TallGuyJohninBKK said:

AFAIK, if an American is living overseas, all purchases of U.S. mutual funds are not allowed, whether it's via an IRA account or any other brokerage account.

 

AFAIK, that restriction on U.S citizens living abroad only applies to mutual fund purchases and not other kinds of U.S. investment holdings.

which should not be a problem in a proper bank computer system with trading restrictions/authorizations applied to accounts and clients/persons.

[Jingthing]

2 minutes ago, tgw said:

I think there should be a law against terminating accounts in good standing of nationals just because they reside abroad.

the due diligence involved - and that's the reason why banks want to close these accounts - is or should be normal business for any bank.

they choose to be lazy and cut on costs.

Yeah but US expats have no meaningful representation so don't expect anything like that. Face it, for the unwashed masses, we're suspect.

[Jingthing]

It's good to see it confirmed that buying ETFs as expats is definitely OK as apposed to mutual funds.

 

Another thing to be aware, be very very reticent to buy foreign owned mutual funds, etf's, etc. That gets you into reporting terrority, much more than FBAR and FACTA. Really, don't do it. Buying US ETFs that hold foreign stocks is not a problem. 

[spidermike007]

You may simply need to provide a mailing address, like a mailbox rental, or the home of a relative. It could be that simple.

 

And if not? Run for the hills. Withdraw everything and transfer it to a company which wants your patronage. No time for utter fools, and dumb rules in this life. 

[spidermike007]

You may simply need to provide a mailing address, like a mailbox rental, or the home of a relative. It could be that simple.

 

And if not? Run for the hills. Withdraw everything and transfer it to a company which wants your patronage. No time for utter fools, and dumb rules in this life. Say no to fools! 

[Misty]

On 12/29/2022 at 9:21 AM, IAMHERE said:

Recieved this email last night. Now where do I put my ROTH, IRA, Regular stock account, and my checking? Oh yes, my retirement and SSA go to the checking at SCHWAB. I kept an address in Florida at my BIL but I'm guessing that's not good enough.

Interactive Brokers is the only other one I know that serves expats 

 

 

We recently noticed international activity in your Schwab Bank account(s) shown below, which may indicate you reside outside the U.S. Schwab Bank requires clients to maintain a U.S. address (no P.O. boxes) as their primary residence. We're writing to request that you confirm your address with us. If we do not receive confirmation, we will need to close your account(s).  1

Your next steps. Please confirm your primary residence within 60 days in one of the following ways:   - ...... We need to receive confirmation of your primary residence by February 27, 2023. If we do not receive confirmation as requested, your account(s) will be closed. You'll receive a notification if your account(s) is closed. If any assets remain in your account(s) at the time of closure, Schwab Bank will either transfer the assets to a Schwab Bank or Charles Schwab & Co., Inc. account with like registration, if available, or mail a check for the entire account balance(s) to the address on record for your account(s).

-   Please be aware that, if applicable, Schwab Bank High Yield Investor Checking ®  and Schwab Bank High Yield Investor Savings ®  accounts, Schwab Bank Bill Pay TM , debit cards, and associated Schwab Bank products will also be closed or discontinued as a part of this process.

Here's what's going on. Schwab has 3 separate legal entities, as follows:

 

1. Schwab One International - is set up to legally work with clients outside of the US. Offers brokerage, IRAs, Roth IRAs, Solo 401(k)s to US expats, also checking and ATM services on brokerage accounts. All of these accounts can purchase US shares and ETFs, but not US domiciled mutual funds as these cannot be sold across international borders.

 

2. Schwab One account - offers accounts for US residents only. Since it offers US mutual funds, Schwab One domestic accounts can't be held by people living outside the US or Schwab will face heavy penalties by its regulators.

 

3. Schwab Bank - only has a domestic US banking license and can't have clients located outside of the US. Schwab faces heavy penalties if it does allow non-US residents to hold a Schwab Bank account.

 

The mutual fund regulations have been around for ages but only began to be enforced with the arrival of FATCA. Many US brokerages have had to close accounts on US expats since then. 

 

Vanguard and Fidelity are set up like #2 above, as are most other US brokers with an exception of Interactive Brokers which is set up like #1.

 

Hope that helps some.

 

 

 

[khaepmu]

On 1/20/2023 at 3:34 AM, Jingthing said:

It's good to see it confirmed that buying ETFs as expats is definitely OK as apposed to mutual funds.

 

Another thing to be aware, be very very reticent to buy foreign owned mutual funds, etf's, etc. That gets you into reporting terrority, much more than FBAR and FACTA. Really, don't do it. Buying US ETFs that hold foreign stocks is not a problem. 

I have a Thai mutual fund, joint account ,with my Thai wife. It pays a very good dividend  I have had it for about 15 years. I report it on my FBAR but more recently don't bother with including it on my US Tax return. Have you every seen the form for reporting a foreign owned mutual fund  to the IRS. It is next to impossible to understand. About six years ago I a had an American accountant in Bangkok do my tax return. I had to do an amended return. He told me the IRS doesn't calculate the taxes on a Thai mutual find the same way they are  calculated on a US mutual fund. He said it is taxed on how much the value of the fund increased in one year. But I don't see any problem owning non US mutual funds and reporting them to the IRS. What's the problem?

[TallGuyJohninBKK]

1 hour ago, khaepmu said:

But I don't see any problem owning non US mutual funds and reporting them to the IRS. What's the problem?

 

See below:

 

https://www.crevelingandcreveling.com/blog/american-expats-dont-get-caught-us-tax-rules-foreign-investments

 

American Expats: Don’t Get Caught by U.S. Tax Rules on Foreign Investments

 

What Is a PFIC?

 

This covers virtually all foreign mutual funds, money market funds, hedge funds, private equity funds, pension funds, and other investment products incorporated outside the United States and distributed by foreign financial institutions or sold by independent financial advisors (IFAs) or brokers.

...

Unlike U.S.-incorporated mutual funds, where capital gains are deferred until realized and which are subject to preferential long-term capital gains rates, PFICs are subject to a particularly punitive taxation regime by default (unless you actively choose the “mark-to-market” accounting method outlined below).

...

As a result, annualized tax rates on PFIC income can exceed 50% or more.

...

most Americans who invest in PFICs are unaware of their different treatment and tend to report and pay tax on their foreign investments as they would an investment in a U.S. domestic fund, which could open them up to penalties, back taxes, and interest charges."

 

[Jingthing]

3 hours ago, khaepmu said:

I have a Thai mutual fund, joint account ,with my Thai wife. It pays a very good dividend  I have had it for about 15 years. I report it on my FBAR but more recently don't bother with including it on my US Tax return. Have you every seen the form for reporting a foreign owned mutual fund  to the IRS. It is next to impossible to understand. About six years ago I a had an American accountant in Bangkok do my tax return. I had to do an amended return. He told me the IRS doesn't calculate the taxes on a Thai mutual find the same way they are  calculated on a US mutual fund. He said it is taxed on how much the value of the fund increased in one year. But I don't see any problem owning non US mutual funds and reporting them to the IRS. What's the problem?

See the post above. 

You have admitted either not reporting the income to IRS or reporting it incorrectly. 

So basically you've been getting away with that so far.

The IRS is understaffed.

It's good that you're reporting that on FBAR as far as potential penalties.

Most people would prefer to avoid such complications. 

Edited January 22, 2023 by Jingthing

[TallGuyJohninBKK]

On 12/30/2022 at 4:32 PM, suzannegoh said:

If you, or anyone else here, has specific knowledge of howwhat tools  banks detect your location when you’re using.

Other than the location of your IP address, which can be changed with a VPN of course, the other indicator I believe some financial institutions may look at is the Time Zone listed on the device being used to log into their systems.

 

Your IP may be changed by a VPN. But most VPN connections don't automatically change your device's time zone setting to match the VPN location. Of course, the user can change their time zone setting themselves, and then later reset it accordingly.

 

I've never done that for existing accounts where I'm already established. But these days, if I'm applying online for a new account and want to avoid any potential hangups, I'll do the manual time zone adjustment myself on my PC while doing the online application process.