Foreign Income and Asset Reporting Issues

More and more U.S. taxpayers have sought opportunities outside the U.S.  Unfortunately, U.S. International tax rules are complex.  As a result many U.S. taxpayers fail to file all required reports and often do not report correct foreign income and either pay too much tax or understate their U.S. income and employment tax liabilities exposing them to substantial penalties.

U.S. taxpayers are required to report worldwide income on their U.S. tax returs.  In addition to reporting worldwide income, U.S. taxpayers also have to declare foreign held assets including but not limited to bank accounts, brokerage accounts, trusts, 10% or more of foreign closely held corporate stock, foreign disregarded entities, and foreign partnership holdings.

If you are uncertain as to your reporting requirements or need help in complying with your U.S. foreign reporting requirements please contact us.

                                     Some International Reporting Requiremnts

Foreign Bank Account Reports

U.S. taxpayers with signature authority or ownership in foreign financial accounts are required to file annually file Form TDF 90-22.1 if the aggregate value of all of the accounts combined exceeds $10,000 at any time during the year.  If your forein bank account holdings are less than his amount, from $1 to $10,000, then you indicate on Schedule B that you own foreign bank accounts.  The penalty for not declaring foreign bank accounts can be as high as $250,000 and lead to criminal prosecution. 

Form 926

U.S. citizens who transfer money or certain other tangible or intangible property to a foreign corporation may be required to file Form 926. 

Form 1042

Form 1042 is used to report tax withholding on income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts.

Form 3520

U.S. persons use Form 3520 to report certain transactions with foreign trusts, ownership of foreign trusts, or large gifts, $100,000, from foreign persons.

Form 5471

U.S. taxpayers who own stock in a foreign corporation, where ownership or voting control meets certain thresholds are required to file Form 5471.  Failure to comply with the reporting requirements could result in a fine of $10,000 and can reach as high as $50,000.

Form 5472

U.S. corporations that are owned by foreign persons are required to file Form 5472.

Form 8865

Foreign partnerships and its U.S. partners are required to file Form 8865 and report information that is required to be included on the U.S. partnership return.