Chapter 22: To share or not to share” – Should a U.S. citizen share a bank account with a “non-citizen AKA alien spouse? – Reporting edition

In Chapter 15 – To Be FORMWarmed Is To Be FORMArmed, we discussed the number of forms, complexity of the forms and the exposure to penalties that impact Americans abroad.

Two of the most common forms are the FBAR and Form 8938. Each of these forms requires Americans abroad to report to the U.S. Government information about their financial accounts. The reporting requirement extends to reporting accounts that are held jointly with the non-citizen spouse. This is NOT a small thing. It means that the U.S. spouse is required under threats of fines and penalty to transmit the financial information about the non-citizen spouse to the U.S. Government. The way to avoid this is for the U.S. citizen spouse to NOT hold accounts jointly with the non-citizen spouse.

The reality is that, in the case of joint accounts, this means that the U.S. citizen will report the bank accounts of the spouse to the U.S. Government. Different people have different views of this.

The following discussion take place on Keith Redmond’s American Expatriates Facebook group. This is a closed group (meaning that you would have to join the group to read the post).

The reality of life for many Americans abroad is three-fold:

1. It is common for Americans abroad to marry non-U.S. citizens;

2. Americans abroad are (with few exceptions) required to report to U.S. Financial Crimes (Think Mr. FBAR) bank accounts that they either have signing authority over or where they can control the disposition of the funds.

3. In some countries, because of FATCA, it is very difficult for U.S. citizens to be able to obtain and maintain bank accounts. This is due to a perception (rightly or wrongly) that banks do NOT want to deal with U.S. citizens.

You will see from the Facebook discussion (which assumes all three of the above points), that many Americans abroad are very reluctant to share bank and financial accounts with their non-citizen (AKA “alien”) spouse.

Possible Conclusion: At the very least you understand the implications of a U.S. citizen holding joint accounts with an alien. Separate accounts would ensure that financial information about the alien will NOT be transmitted to the IRS.

The Facebook discussion referenced in the above tweet is very interesting.

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