UK financial products (ISA, SIPP) and US tax

[visacats 9]

Hi,

I'm looking to relocate to the US via spousal visa later this year.

I understand that as a green card holder I will need to file taxes in the US pertaining to my worldwide assets and income.

Broadly speaking I understand that there is a process for declaring foreign assets and claiming tax credits in my US return.

However, I have heard that UK ISA products can be tricky, because

1. the US does not recognise their tax wrapper status,
2. where they are stocks and shares, apparently they can be considered PFICs (Passive Foreign Investment Companies), which are apparently taxed more heavily in the US,
3. if stocks and shares, they can also trigger additional (and potentially complex) filing requirements due to the type of products they are.

Conversely, my understanding is that ISA cash products do not trigger the additional filing (although they are still not considered tax exempt in the US).

Currently I have two different ISA stocks and shares products. I would prefer not to close them or cash them out right now as they are somewhat below what I have invested due to market fluctuations - I am sure they will bounce back, but I'd prefer to let them sit until they have at least recovered to the point of my initial investment.

 

My questions are:

1. any experience from anyone here in navigating stocks and shares ISA products in the US tax system?
2. Obviously we are currently in the US financial year of 2023 already. If I do get the opportunity to either withdraw the funds and close these accounts, or else convert them to cash ISAs, and I do this prior to arriving in the US on the spousal visa, will I be able to avoid any complicated filing on the stocks/shares because those accounts would have been closed before I became a US resident? (It seems there is the option to declare a First Year Choice, which I take to mean I can file based on my affairs as they are from the point at which I begin to be considered a US resident.) https://www.irs.gov/individuals/international-taxpayers/tax-residency-status-first-year-choice
   1. Or will I need to declare and report on the the Stocks and Shares ISAs regardless, in virtue of them having been open for a part of this financial year?
3. Separately, are there any known complications with SIPP and managed UK pensions in the US? I assume there are mutual understandings in place for 'standard' pension funds but again any insights welcome here.

 

I realise that at some point I may need to consult with a cross-border accountant, but I'm doing some research first, so any experiences or insights welcome.

 

Thanks!

[Crazy Cat 41,728]

Income is taxed.  Assets are not taxed, but might have to be reported to the Treasury Department via an FBAR.   I think your questions are beyond the scope of a self-help forum.  Good luck on your journey to the US.

[visacats 9]

16 minutes ago, Crazy Cat said:

Income is taxed.  Assets are not taxed, but might have to be reported to the Treasury Department via an FBAR.   I think your questions are beyond the scope of a self-help forum.  Good luck on your journey to the US.

They are in the case of ISAs - yes, FBAR reporting and other more technical filing requirements too.

 

I'm asking here because they are very common in the UK, effectively a type of savings account or perhaps along the lines of a US ROTH IRA account, and I won't be the first one to have run into this.

 

But yes, I agree that I will likely require professional input as well.