Posts by Stephen J. Dunn
Mysterious Form 926
The United States taxes its citizens and residents on their worldwide income. The Internal Revenue Service requires the filing of a series of information returns by U.S. taxpayers to report their foreign transactions and assets. This article concerns one of those information returns, Form 926, Return by a U.S. Transferor of Property to a Foreign…
Read MoreShareholders in Closely-Held Foreign Corporations: Beware Form 5471
A U.S. taxpayer whose interest in a closely-held foreign corporation meets a specified threshold must file Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, with his U.S. income tax return. Significant penalties may be assessed for failure to file Form 5471. More importantly, the assessment statute of limitations as to…
Read MoreRequired Reporting of Foreign Financial Accounts
U.S. persons are required to report to the United States government concerning foreign financial accounts. A “U.S. person” is a citizen or resident of the United States. A resident includes a lawful permanent resident, i.e., a greencard holder, or someone who satisfies the “substantial presence test.” An individual meets the substantial presence test with respect…
Read MoreWhy You Need an Attorney in Charge of Your Foreign Accounts Compliance Case
Accountants commonly send an “organizer” to a client with instructions to complete and sign it and return it to the accountant. The completed organizer then serves as the starting point for preparation of the client’s annual income tax returns. The problem is that there is no accountant-client privilege in Federal court, and a completed organizer…
Read MoreCompliance Required of U.S. Persons Concerning Foreign Financial Accounts
U.S. persons are subject to compliance obligations concerning foreign financial accounts under two statutes, the Internal Revenue Code and the Bank Secrecy Act. A prior article explores who is a “U.S. person.” Internal Revenue Code A U.S. person is subject to compliance obligations under the Internal Revenue Code only with respect to foreign financial accounts…
Read MoreReporting Horrors of Foreign Mutual Funds (“PFICs”)
U.S.-based mutual funds annually issue to each of their shareholders a Form 1099 reporting the shareholder’s share of interest, dividends, and capital gains realized by the mutual fund during the year. The mutual funds send a copy of the Forms 1099 to the Internal Revenue Service, so that it can verify that the shareholders properly…
Read MoreYou May Only Need to File Delinquent FBARs
Many U.S. persons are alarmed upon learning of their reporting obligations with respect to foreign financial accounts. Those obligations include reporting the accounts and income therefrom on U.S. income tax returns, and reporting the accounts on FinCEN Forms 114, Report of Foreign Bank and Financial Accounts, (“FBARs”). “U.S. persons” required to report foreign financial accounts…
Read MoreBeneficial Ownership, Income Tax, and FBARs
For U.S. income tax purposes, ownership of property means beneficial ownership. Only the beneficial owner of property is required to report taxable income from the property on a U.S. income tax return. The beneficial owner of property is its real, true owner, the person entitled to control the property, and to realize the benefit of…
Read MoreU.S. Persons’ Reporting Obligations Regarding Foreign Financial Assets
The United States imposes reporting obligations upon U.S. persons with respect to their worldwide income and financial assets. The reporting obligations include reporting worldwide income on an annual U.S. income tax return, and reporting foreign financial assets on a Form 8938, Statement of Specified Foreign Financial Assets, filed with a U.S. income tax return. The…
Read MorePassive Foreign Investment Companies: U.S. Clients Should Consider Tax Compliance
Foreign mutual funds, known as passive foreign investment companies or “PFICs,” pose significant compliance burdens for U.S. taxpayers. Click here for the full article. Other posts of interest: U.S. Persons’ Reporting Obligations Regarding Foreign Financial Assets OVDP Often a Bad Choice for Foreign Accounts Compliance You May Only Need to File Delinquent FBARs Reporting Horrors of Foreign…
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