One of the most complex areas of tax law involves international tax. This is because oftentimes, there are two competing bodies of law. This is especially common when a U.S. person has a foreign certificate of deposit (CD) that generates interest income.
There is the foreign country’s tax laws, rules and requirements, and then there are the filing requirements required by the IRS in United States.
What can make this exercise even more complicated, is when the foreign countries tax laws conflict with US tax laws.
Summary of U.S. Tax on Foreign CD Interest
In a very common situation, a client contacts Golding & Golding, with several foreign accounts and assets. Usually, the client will have some form of savings account which typically includes a certificate of deposit or CD.
With a CD, there is usually a term such as one-year, three-years or five-years. During the term, the interest in the account is accruing but not being distributed. While in the foreign country in which the CD is being maintained there is typically no tax until the money is distributed, the rules in the United States are different.
U.S. Tax on Accrued Overseas CD Interest
Under the US tax rules if a person has a CD in a foreign country the accrued income is taxable – unless otherwise limited, excluded or exempted under other IRS regulations. Therefore, in a typical example if a person has $400,000 in a Brazilian FD, Indian CD or Hong Kong Term Deposit that generates income — the accrued income is taxable in each year it accrues — irrespective if it is distributed or taxable in the foreign country
Can I Gross It Up at the Distribution?
Why? Because the IRS sees that as a potential artificial tax avoidance. For example, if a person knows that the CD terms five-years then they may be tempted to manipulate their annual taxes either during the first four years or during the fifth-year to artificially reduce the overall tax liability.
In other words, the IRS doe not let taxpayers plan around the gross-up of a foreign Certificate of Distribution (CD).
International Tax Amnesty – Golding & Golding (Board-Certified)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced FBAR Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. 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.