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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 493
Experience:  Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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I have a checking account in Italy. When I asked for a wire

Customer Question

I have a checking account in Italy. When I asked for a wire transfer the banker asked me these questions:
"We need to understand where you have the main tax residence if in Italy or America.(In America)
Do you have the Italian citizenship? (Yes) Do you file tax return in Italy or the United States alone? (Only in U.S.) The pension earned in Italy and which is already taxed in Italy is it declared to America and then taxed? (Both declared in America and then taxed)
Please let me have this news as soon as possible so that we can enter the required data and proceed with the transfer."After I answered her, the banker wrote:We are filing the necessary reports, as soon as the government inspections office will give us the green light will proceed to make the transferHow long do you think it will take for the government inspections office to give the green light to proceed to make the transfer?
Please also tell me about the process of getting approval because of FATCA. Thank you in advance
Submitted: 1 month ago.
Category: Finance
Expert:  taxmanrog replied 1 month ago.

Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

Expert:  taxmanrog replied 1 month ago.

I am an expert in this area. I have been working with US expatriates for 31 years (you are an expat as you are an American living in Italy). Do you realize that under Article 18 of the US-Italy tax treaty your pension is exempt from tax here in the USA? You report it as income on the pension line, then you deduct it on Line 21, other income, using the description "US-Italy Tax Treaty - See Form 8833 attached", then putting the pension amount in as a subtraction (negative). I have several expats retired in Italy that we do this for.

As a US citizen, you should be reporting the foreign bank accounts in two places. First, you need to file a FinCEN 114 by June 30 of each year to comply with the FBAR rules and report the accounts to the US Treasury Dept, Financial Crimes section.

You also have to report your specified foreign assets, such as foreign bank accounts, foreign pension plans, foreign insurance policies, foreign stocks, brokerage accounts, etc.

Here is a link to a table that gives a clearer picture of what you need to report.

https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements

If you are not "compliant" then the bank will withhold 30% of the amount. In order to become compliant, you have to file a W-8 with the bank (NOT a Form W-8 BEN! They might try to get you to fill one of these out, but they are for Non-citizens only! It says that right on the top of the Form!).

I hope this answers your questions! If you have any more, please let me know and I will answer.

Thanks!

Roger

Customer: replied 1 month ago.
I am an American living in the US. I got Italian citizenship through marriage. I file FBARs yearly and declare the income (from my husband 's pension ) on my income taxMy question is how long do you think it will take for the government inspection office to give permission for for the wire transfer to take place. It has been almost two weeks since I sent the banker my answers to fill out the forms
Expert:  taxmanrog replied 1 month ago.

Did you actually fill out the W-8? That may be the hold up. The intergovernmental agreements that the IRS has in place with all the foreign banks require that they do their due diligence to make sure that the account holder is compliant. This includes getting the Form W-8.

Once that is completed, it should not take too long. Sending information to a banker is not filling out the W-8.

Expert:  taxmanrog replied 1 month ago.

Please note that if you have been declaring your husband's pension on the tax returns (I assume he has a Social Security number or ITIN) I hope that you are also subtracting it with the Form 8833 so you will not pay tax on it here in the US.

Customer: replied 1 month ago.
we get a tax credit
Expert:  taxmanrog replied 1 month ago.

You can get a credit for the Italian tax that you pay on the pension, but you can actually exclude the pension, which will reduce the tax on your other income items as it may put you in a lower tax bracket.

Expert:  taxmanrog replied 1 month ago.

I am sorry, you need to fill out a W-9, not a W-8. I was thinking of the W-8BEN. I just reread what I sent, and I typed W-8 instead of W-9.

Mi Dispiace!

Roger