Please find excerpts from our June 30, 2019 Newsletter below.
Various and Sundry Topics: Swiss Tax Audits, The US Sharing financial information with non-US governments, Google Data Privacy, Claiming US Social Security from Europe, Resources for Teenage Investors, The Case Against Early Retirement and more…
In the past year we have heard from several clients (and from Swiss tax advisors) about audits of the wealth tax declarations in Switzerland, especially Vaud, for tax years of 2015- 2017. In Vaud, the tax authorities were looking into the details of declarations about the value of cars, household goods and other sundry items that were customarily ignored in the past decades. It is very possible, as many high paying jobs have been exiting Vaud, that the tax authorities there are feeling a decline in revenue, and so are targeting people where they believe they can bring in some extra revenue more easily. If you receive a letter from the tax authorities, don’t take it personally that you or your tax preparer have done anything out of the ordinary, there just seems to be a shift in focus…though it may end up costing you some extra time and taxes.
Thanks to Marina to pointing out this article where the US courts have allowed the IRS to serve a John Doe summons on several US financial institutions on behalf of the Finnish government. It is suspected that some Finnish residents may not be reporting all their income and assets in accounts in the United States. Why are we sharing this with you? After the FATCA legislation the world’s financial institutions started becoming a branch of the IRS and started sharing information with the US about US taxpayers. With the introduction of CRS (Common Reporting Standard for the Automatic Exchange of Information) that most OECD governments automatically share financial information with each other about their taxpayers, with the US being the major exception. The US government has shown some reluctance to reciprocate on sharing information under FATCA and CRS but now perhaps the tide is starting to change? So, if you have an account in the US that you may have forgotten to report on your tax return and are not a US taxpayer, you may want to take note. We always encourage our clients to report their income on tax returns where-ever they are required, if you need any help or advice from us, please don’t hesitate to let us know.
We have written a lot of about data privacy in the past…something that is becoming more and more difficult as Alexa, Siri, Google, Facebook, the Phone Company, Governments and thousands of other firms and organizations scoop up digital data in so many formats. This article shows how Google has now made it a little easier to have your information stored for a much shorter period of time, just the last 3 months if you would like. This is something you must actively choose, and the article gives you step by step instructions. Privacy will likely become a larger theme as time goes on. Perhaps one of the next big companies will make it easy for individuals to be “forgotten” or to just stay more discrete on-line; across all platforms.
We are hearing from a few people that claiming US Social Security is becoming more challenging from outside the US and the government has scaled back its resources at various Embassy and Consulate locations. If you have any stories or tips to share, we would be happy to share them. One thing that I can report anonymously from a member of the Federal Benefits Unit is that if you are trying to set-up an account on-line with the US Social Security Administration, and had lived in the US before [Meaning you have some US indicia that can be used to pass their identifying security questions] , that you may want to access the website with a VPN (Virtual Private Network) that gives you a US rather than a foreign IPS address. This will at least allow you to try and establish an account on-line if you have not done so already. Or, you can try and do this the next time you visit the US. For all clients who have a record with US social security, we do recommend keeping on hand a recent statement and establishing an account on-line in order to ease the claim of future benefits.
Many of our clients ask us questions on how they can help educate their teenage or young adult children on personal financial matters. I am a big fan of learning by doing and so for my own children (the older 3 between 9-14) they occasionally will have a look at their modest investment accounts, ask questions and choose stocks to invest in. My oldest Julian, through his school, has been playing the Stock Market Game which has been a great educational resource. TeenInvestor is another website you can pass along to your teenagers who may want to learn more about investing. As your children get old enough, learning to work with money whether it is an allowance, getting a part time job, learning to save, invest, donate, earn and spend wisely are all important components of a financial education. Learning by doing is one of the best methods and if you would like to discuss this topic in more detail, please get in touch.
We love to receive articles, book suggestions and information from our clients and one of my favorites from this quarter was a Wall Street Journal article on the case against early retirement. While many employees dream of the days of not having to go to the office as a reward for decades of hard work, it turns out that retirement is not healthy for many people. In addition to picking up bad habits such as being too sedentary, or eating or drinking too much, in retirement many people lose a lot of the intellectual stimulation and social interaction that the workplace can deliver. So far, if I look at the sample of White Lighthouse clients who have recently retired, I would give you high marks for enjoying travel, visiting with family and friends and keeping active socially and physically fit! Personally, I am planning to work well into my 70s’ health permitting, as our clients have helped to make this profession so enjoyable!
If you are a US taxpayer and find yourself in the very unfortunate situation of having your passport revoked or a passport renewal denied for tax reasons, the IRS has announced an expediated process which would enable the State Department to process a decertification within 24-48 hours. ACA had originally worked on this issue helping to get the 30-day time period for the IRS to decertify a delinquent taxpayer (the original legislation did not compel them to any time period) and we are all happy to know that this process can now be moved along much more quickly. Glen Frost, assistant legal counsel at ACA has more information about the subject here.
Before anyone asks, yes, I have seen that Bitcoin was recently back over $13,000 from a low of around $3000 last year and no we don’t recommend buying any unless you do so for the entertainment value. I still don’t think the long-term value is worth much more than the heat and CO2 that was used to mine each one. Facebook, one my least favorite investments in the “technology” sector and suffering from reputational challenges, has announced they will try and lead a consortium and create a cryptocurrency and payment system, Libra. They have an impressive line-up of founding members signing up such as Visa, Mastercard, Vodafone, Paypal and Andreessen Horowitz to name a few. Financial systems in general and financial payments (think credit card fees and currency exchange) are certainly ripe for disruption or at least lower costs and higher efficiency. Whether there will be a crypto or other electronic currency of any significance that supplants government run monetary systems remains to be seen. Like all areas that technology touches, there will certainly be positive impacts (lower costs) and winners and losers on the investment side of things. If traditional currencies and the related payment systems adopt new technologies (e.g. cheaper payment systems and blockchain ledgers) it will be very difficult for non-government backed currencies to match their stability. Who do you trust more with financial stability Facebook, Western democracies, The world’s central bankers? Okay, maybe there is a chance of success after all…I’m just not ready to commit yet…
Transferwise – Foreign Currency Payments & Transfers – Easier and Less Expensive…Mostly
Part of living, working and traveling overseas means making payments and transfers in different currencies. Exchanging money from one currency to another can be seamless and very inexpensive for some transactions (e.g. some US credit & debit cards) or very expensive and time consuming in others. It can be frustrating and rarely is the exchange rate you receive obvious. Many of you are sending money between the US and Europe or other countries and we have a suggestion that will save many of you time and money. There are many fintech companies worth considering such as Transferwise, Revolut, OFX; we will feature Transferwise below:
Transferwise is a relatively new company, founded in 2011 and they have been one of the most successful FinTech companies of the 21st century. While several of you had mentioned the company before (thank you!) a few of us finally got around to setting up accounts (including myself after reading a recent article in the Economist) and using it to transfer money a few times between the US, Switzerland and the Netherlands. The account set-up process is easy (have a scanned copy of a government id handy as well as your bank account details); transferring money is easy and the cost of the exchange and transfer is crystal clear. You don’t have to set-up a financial account with Transferwise, though they do offer this as an option (for US taxpayers, this would need to go on your FBARs and 8938s as the accounts are not US domiciled) and it does allow for certain additional features such as payments in the same currency and multi-currency cash accounts. Transferwise also allows business accounts too, which we set-up and again this was also very easy.
For those of you who send wire transfers out of your Schwab account, we see that Transferwise will save you money on transfers that are less than $500,000 in value. Schwab charges a fixed fee of $25 plus an approximate exchange fee of .70% for CHF transfers under $500,000 (though this is not transparent, and the exchange fee differs per currency). For those of you sending money into your Schwab accounts, Schwab uses the same exchange rate and while this is more attractive than many banks (especially at lower amounts), Transferwise is again less expensive with fees ranging from about .65% for very small transfers to .26% for larger ones. Transferwise also does have a cap on transfer values, though this seems to be generally over the equivalent of $1 million for all currencies we have explored.
When comparing exchange rate transfers out of some of the Swiss Banks, including Swissquote, we found that Transferwise was very competitive on transfers below 150,000 (CHF/USD), but less on transfers above ~150,000 CHF…though this really depends on the bank and your ability to negotiate rates. Without even setting up an account, you can go to the Transferwise website and see the exact rate and cost. This is radically more transparent than most financial institutions.
For those of you wanting to send money into and out of your Schwab brokerage accounts using Transferwise, you will have two options 1) If the Schwab checking account feature is on your account (this is free of charge) you will be using the routing number and 10 digit checking account number on the bottom of your checks (for both sending and receiving using Transferwise), not your 8 digit Schwab brokerage account number. Or, you can send an ACH transfer direct to your Schwab account though in this case please contact us for instructions or review on the Schwab web site. During the coming weeks we will be developing a handout that explains many of the features of Transferwise and will be encouraging our clients to give it a try if we think it will be beneficial for their situation.
For those of you who are leaving Switzerland or another European country and are concerned about being able to make payments into Europe if your bank account is closed, Transferwise is another solution to make payments…but not yet perfect in terms of holding some currencies.
Like all services, Transferwise is not “the best”. For transfers over $150,000 or more you can still get better rates in some cases by negotiating with your bank before making a transfer. For transfers into and out of your Schwab accounts that are over $500,000, Schwab may give better rates. In some cases, also, it seems that going through Transferwise, compared with a wire transfer, may take an extra day or two from what we have seen and heard. Finally, Charles Schwab does still have the best guarantee in the business in terms of losses from on-line fraud. While we have not had any clients lose money from internet fraud from any accounts we manage, on-line data and financial security will remain an issue so long as there is internet banking. Note that Transferwise does incorporate two-factor authentication with your mobile phone, while not fool-proof, as a money transfer service they do have to take online data privacy and financial security very seriously.
Again, Transferwise is not the only service out there that offers great savings and transparency. Revolut, based in the UK, may be interesting for some of you though apparently US residents are currently prohibited from joining. This link has a comparison of Transferwise and Revolut. We like Transferwise but for your situation, other services may be even more beneficial.
In summary, we believe Transferwise or other similar companies can save you money and time for many of your foreign exchange transfers and payments. We also believe you will appreciate the transparency on the fees as well as the e-mail notifications that keep you informed on the status of your transfers. If you would like to discuss a transfer and what is best for your situation, please contact anyone on our team.
One of the best treats for my birthday, a card designed by Emma Lachowitz:
Our clients find our newsletters to be a valuable part of working with White Lighthouse.
A sample of our past newsletters is freely available below.
March 31 2019
Featuring contributions from Marina Hernandez, EA, CFP®; John Wanvig, CFP®; and Jeff Haindl CFA, CFP®
What to expect in the 2018 US Tax Season
Socially Responsible Investing
Online American Notary Service
Various items from ETIAS, Swiss 1000 Francs, and World Events
American Citizens Abroad (ACA), Tax Reform and a Bill in Congress
JUNE 30 2018
The Economy and Interest Rates
“Rich Habits: The Daily Success Habits of Wealth Individuals”
by Tom Corley
The Forms W-8BEN and W-9
US Based Clients with Accounts at Charles Schwab and Company
American Citizens Abroad (ACA) Town Hall in Zurich & Tax-Reform for American Citizens Abroad
Understanding the Purpose of Tax Treaties
by Marina Hernandez, EA, CFP®
JUNE 30 2017
Saving Enough or Spending Too Much?
An Investment Book for Teens
Are You Ready for the Next 25% Drop or More in Global Stock Markets and In Your Investment Accounts
What’s Going On In Europe? The Euro is Rising!
US Taxpayers Overseas - American Citizen’s Abroad (ACA) Town Halls in Basel & Zurich
JUNE 30 2016
Brexit News & Analysis
Investment Portfolio Management - Strategy, Impacts on Your Portfolio & Decision Making
Is the S&P 500 Over-valued?
Does it matter?
When 1 in 10,000 or more odds is just not good enough
FBAR and Tax Return Tips for US Taxpayer by Marina Hernandez,
Personal Financial Considerations