Foreign financial assets have to be reported when filing the yearly income tax return. We assist clients with disclosing foreign financial assets and maintaining tax compliance in the US.
Some of the forms that we prepare include:
- IRS Form 8938 on the disclosure of certain foreign financial assets
- FinCEN 114 on the disclosure of foreign bank and financial accounts
- IRS Form 5471 on the disclosure of interests in certain foreign corporations
Almost all US residents who have moved to the United States from abroad have overseas bank accounts. There is a complex set of requirements to report these accounts, and the penalties for failing to disclose them are onerous.
The goal of these stringent reporting requirements is to combat tax avoidance. Unfortunately, average law-abiding taxpayers can easily fail to be in compliance with these rules.
For example, certain pensions from abroad are considered a trust, therefore triggering a special reporting requirement as a distribution from a foreign trust on Form 3520 Annual Return to Report Transactions with Foreign Trusts and Receipt of Foreign Gifts. This form has to be filed beyond merely reporting the pension income on Form 1040.
We advise clients on making the correct disclosures to the IRS about their foreign accounts.
Foreign Income Reporting
All US citizens and permanent residents (green card holders) have to pay US taxes on all of their worldwide income, even if they do not live in the United States.
The various categories of incomes are subject to a complex set of rules. The tax payment requirements may also be modified by bilateral tax treaties in place with a limited number of countries.
We advise clients on complying with their income tax reporting requirements to the IRS. In addition to the reporting of income, return positions based on tax treaties have to be stated on the often overlooked IRS Form 8833.
Foreign Inheritance Reporting
Inheritances and gifts over $100,000 received from outside the United States during the course of a year have to be reported to the IRS on Form 3520 Annual Return to Report Transactions with Foreign Trusts and Receipts of Certain Foreign Gifts.
We advise clients on complying with these reporting requirements.