(Fair warning: Moderately preachy post ahead…)
I’ve mentioned it before, but in this post I’d like to go over some of the implications of tax and marriage in Switzerland and why we have ultimately decided that joint accounts are absolutely not a good idea for us because of my American citizenship.
Our tax status changed in Switzerland as soon as we were legally married in August 2010, but we would only start our mandatory joint filing in 2011. We do not have the option to file separately here.
In January 2011, we were figuring out how to pay a big lump of tax money together. I figured we were married now, and all the money we have is “our money.” It only made sense that if we have to pay and file taxes together, we should both have access to Mr. Funnel Cake’s tax account to make things easier.
We bickered back and forth about it because Mr. Funnel Cake has what seems like a million accounts between two banks and is easily irritable when discussing taxes, but eventually he agreed that we should combine things. I think he was tired of me continually giving him my share of the taxes in various accounts. It was confusing and annoying for both of us.
Mr. Funnel Cake called up our bank and asked them to combine our information. Hoorah. Nothing happened. He called again. Apparently the bank had to send all of Mr. Funnel Cake’s information to the “American services” branch because if I had access to his accounts, they had to separate them from the non-American accounts in Switzerland. (This should have been my first warning sign.)
We received a load of papers in the mail for us to sign that it was OK for our accounts to be combined and by November 2011 (yes, almost a year later!) we finally had combined our bank accounts at Bank A. At this point Mr. Funnel Cake realized he had asked Bank A to give me access, when his tax account is really at a completely different bank that I don’t use. Great. (Facepalm.)
Even though we suddenly had access to all of each other’s money at the same bank, we kept our financial system the same as when we were dating. We both received our salaries in our personal debit accounts and contributed proportionally equal amounts into a joint account that covers our rent, utilities, groceries, and all household expenses. We both save diligently in separate savings accounts, and at the time all this was happening we were starting to think about buying a flat together.
After the tax account snafu, I finally, FINALLY got Mr. FC’s correct account information for his tax account so I could pay my share into it, but I still couldn’t access the tax account. We thought about asking Bank B if they could give me access to this account too, when something stopped us:
I discovered FBARs.
I was innocently researching how to do my US taxes, because even after three official tax years living in Switzerland, I still have trouble figuring out how to file the complicated forms every year. That’s when came across the “Report of Foreign Bank and Financial Accounts,” or FBAR, on a random internet forum.
Apparently, as soon as I have more than $10,000 in my foreign bank accounts combined, I am supposed to report each and every bank account to the US Treasury including the name of the bank, the account number, and the highest amount that was in that particular account during the year. It doesn’t matter if you have $1 in one account, $3,000 in another and $7,000 in another, once you go over that aggregate limit you need to file an FBAR every year.
What’s more confusing is that if you transfer money from one account to another, it still can count toward the highest balance for that individual account that year. So if you earned $10k at work and had it in account A and transfer it to account B, you have to report $10k as the highest amount for both accounts, making it appear like you had $20k throughout the year. The rules are slightly bizarre and many citizens abroad and international tax preparers are confused about how to file correctly.
Considering that we live in the most expensive city in the world, $10k doesn’t even cover three months of rent and groceries in Switzerland. And since we are trying to save for a house, I should definitely should be filling these out! The currency exchange rate has also been inflating the Swiss franc the past few years, which makes it seem like I have even more money to the US.
Around this time I had a “Why didn’t anyone teeeeell me this?!?” moment. It would have been great to learn about FBARs in my “how to be an expat” class, because the next part is fun:
If you purposefully don’t fill out your FBAR forms and turn them in by June 30th every year, Americans are liable for fines of up to $10,000 and possible jail time. As if I don’t worry enough about filling out my US taxes properly!!
Now, I don’t have a problem filling out my FBAR for Uncle Sam. I don’t exactly agree with the idea or appreciate the time it takes to fill out annually, but it IS the law and so I will do it diligently. Uncle Sam can have as much information about my Swiss money because the law is on Sam’s side.
What I am not OK with is the fact that Americans are required to report ALL financial accounts that they have authority over. This meant that because we combined our accounts, I was required to give the US Treasury all of Mr. Funnel Cake’s foreign bank account numbers and balances.
I am really not comfortable with that.
Mr. Funnel Cake, a Swiss who does not live in the US, work in the US, or hold a green card or US citizenship, is not OK with that either. He realizes that I was legally required by my country to give them this information, but boy did it make both of us angry with the IRS.
We went right back to Bank A and told them to separate all of our accounts again, save for the little joint account we use for household expenses. I do not want the IRS monitoring my foreign husband’s foreign assets. My US taxes pay for nothing in our life in Switzerland and we deserve some privacy in our marital finances.
With my 20/20 hindsight, I really wish someone had warned us about all this shiz. Not everyone realizes that you even need to fill out US taxes as an American abroad, but even fewer realize the implications being American means for joint finances with your spouse. I wish we had never combined!
We are still using our original financial plan from dating, with the lone joint account for household expenses and that’s it. I’m not comfortable with my husband’s salary or savings going on paper record in the States, so we will keep things separate until one of us decides to stop working for whatever reason.
We still consider it “our money” even if it is separate and we don’t have any problems combining, but we value privacy and that’s not something my American citizenship affords us.
I should have realized when we called the bank and they told us they would need to send our account information to the “American services” that this was a bad sign. It is because banks in Switzerland are starting to protect themselves from FBAR and FATCA (Foreign Account Tax Compliance Act), which are two tax acts made to catch Americans hiding money abroad, but which capture Americans trying to live abroad in the same net, unfortunately.
If you and your honey live abroad or plan to and this might affect you, please read up on the requirements of FBAR and FATCA reporting:
FBAR: For Americans abroad with over $10,000 in their accounts
FATCA: For Americans abroad with over $200,000 net worth
Hopefully if you have a little more knowledge than we did about filing requirements for Americans, you can make a more well-informed decision about your finances than we did.
Do you have any special requirements that helped you decide how to deal with finances with your spouse?