- 1 Taxpayer Guide to Reporting Offshore Accounts & Assets to the IRS
- 2 Golding & Golding, A PLC
- 3 Reporting Includes More than just Bank Accounts
- 4 Not all Foreign Account Reporting is Due at the Same Time
- 5 Examples of International Informational Reporting Forms
- 6 Foreign Accounts Non-Compliance
- 7 What Should You Do?
- 8 Foreign Accounts Compliance – IRS Amnesty Procedures
We summarize the basics for you.
Taxpayer Guide to Reporting Offshore Accounts & Assets to the IRS
In recent years, the IRS has significantly increased the enforcement of offshore reporting. While some reporting can sometimes be very difficult (PFIC excess distributions), other reporting is not so tedious.
Golding & Golding, A PLC
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Reporting Includes More than just Bank Accounts
The IRS and FinCEN (Financial Crimes Enforcement Network) require that U.S. account holders report more than just bank accounts.
Some additional reportable accounts and assets, include:
- Foreign Investment Accounts
- Foreign Securities
- Foreign Business ownership
- Foreign Mutual Funds
- Foreign ETF
- Foreign Pension
- Foreign Life Insurance
- Foreign Trusts
Not all Foreign Account Reporting is Due at the Same Time
Not all of your foreign accounts have to be reported at the same time.
Different international informational reporting forms may have different due dates than others. In addition, when it comes to requesting an extension, some forms are on automatic extension (FBAR), some forms go on extension in accordance with your tax return extension, such as Form 8938 — and some require an additional extension form, such as Foreign Trusts on Form 3520-A.
Examples of International Informational Reporting Forms
The following is a list of the more common forms you may have missed:
FBAR (FinCEN 114)
The FBAR is used to report “Foreign Financial Accounts.” This includes investments funds, and certain foreign life insurance policies.
The threshold requirements are relatively simple. On any day of the year, if you aggregated (totaled) the maximum balances of all of your foreign accounts, does the total amount exceed $10,000 (USD)?
If it does, then you most likely have to file the form. The most important thing to remember is you do not need to have more than $10,000 in each account; rather, it is an annual aggregate total of the maximum balances of all the accounts.
This form is used to report “Specified Foreign Financial Assets.”
There are four main thresholds for individuals is as follows:
- Single or Filing Separate (in the U.S.): $50,000/$75,000
- Married with a Joint Returns (In the U.S): $100,000/$150,000
- Single or Filing Separate (Outside the U.S.): $200,000/$300,000
- Married with a Joint Returns (Outside the U.S.): $400,000/$600,000
Form 3520 is filed when a person receives a Gift, Inheritance or Trust Distribution from a foreign person, business or trust. There are three (3) main different thresholds:
- Gift from a Foreign Person: More than $100,000.
- Gift from a Foreign Business: More than $16,076.
- Foreign Trust: Various threshold requirements involving foreign Trusts
Form 5471 is filed in any year that you have ownership interest in a foreign corporation, and meet one of the threshold requirements for filling (Categories 1-5). These are general thresholds:
- Category 1: U.S. shareholders of specified foreign corporations (SFCs) subject to the provisions of section 965.
- Category 2: Officer or Director of a foreign corporation, with a U.S. Shareholder of at least 10% ownership.
- Category 3: A person acquires stock (or additional stock) that bumps them up to 10% Shareholder.
- Category 4: Control of a foreign corporation for at least 30 days during the accounting period.
- Category 5: 10% ownership of a Controlled Foreign Corporation (CFC).
Form 8621 requires a complex analysis, beyond the scope of this article. It is required by any person with a PFIC (Passive Foreign Investment Company).
The analysis gets infinitely more complicated if a person has excess distributions. The failure to file the return may result in the statute of limitations remaining open indefinitely.
*There are some exceptions, exclusions, and limitations to filing.
Foreign Accounts Non-Compliance
Foreign account compliance may result in severe penalties. Therefore, you may consider entering the IRS offshore voluntary disclosure/tax amnesty, before it is too late.
What Should You Do?
Everyone makes mistakes. If at some point you discover that you should have been reporting your foreign income, accounts, assets or investments, the prudent and least costly (but most effective) method for getting compliance is through one of the approved IRS offshore voluntary disclosure programs.
Foreign Accounts Compliance – IRS Amnesty Procedures
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in offshore tax and reporting amnesty. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.