As an accountant, my goals are to ensure you are saving as much tax as possible but also that you are in compliance with the tax code to prevent any possible mistakes.
One of the most common [accidental] omissions we see when preparing taxes has to do with international items. There exists a lot of confusion about this, so I will summarize.
If you have ownership (or beneficial ownership) of any of the following, there are special US-required filings:
FBAR/Fincen filings: Non-US bank accounts whose total aggregate value has exceeded $10,000 USD equivalent at any point in the taxable year: these must be reported. There is much confusion here because many taxpayers believe that if you have one foreign account with 5,000 and another with 6,000, you do not have to report. However, that is not the case – this rule requires that you sum up the amounts of all accounts, and if it is over $10k, you must disclose. There is no tax due for disclosing.
IRS Asset Disclosures: These are similar to the above Fbars, however, the threshold is larger. Many taxpayers assume that as long as you have filed your Fbar, you are fine. However, that is not the case – the IRS requires a secondary reporting of non-US accounts on your actual returns, as well
Canadian TFSA plans plus RRSP, Australian superannuation funds and foreign retirement account must be reported, even if you have not taken out funds. We see this missed regularly
Non-US held mutual funds and certain ETFs – if you have a non-US account that holds non-US mutual funds, you likely must file form 8621. Foreign funds held in a US account do not need this form – this is only for foreign accounts containing these types of investments
Foreign partnerships – if you own over 10% of a beneficial interest in a foreign partnership, you must file form 8865
Foreign corporations or businesses – again, over 10% ownership and you must report, this time on form 5471
Non-US trusts: if you are the owner of a non-US trust, you must file form 3520-A
Gifts from non-US person: If you received a gift in excess of $100,000 USD equivalent at any point of the year, you must file form 3520
Non-US inheritance: if you have an inheritance from a non-US person of over $100,000 total value in the year, you must disclose (also on form 3520)
Non-US pensions & insurance policies: the rules here are complex & outside of the scope of a quick email, but if you believe this appies, just let me know
Sale of non-US property: this may need to be reported on IRS forms 8949, 4797, or schedule D, depending on the situation
These rules apply to persons filing a US resident return, such as those that are US citizens, those passing the substantial presence test (lived in the US majority of the year), green card holders, etc. Please note that there are often massive penalties for noncompliance and even worse ones for wilful noncompliance, so it is important to get caught up on these.
If you have accidentally missed one of these filings in a prior year, there are IRS amnesty programs available, such as the IRS “foreign streamlined reporting procedures.”
Please feel free to reach out to us if you need help with the above or with any tax or accounting topic. If you have questions, just let us know. The best way to get a hold of me is to hit “reply” to this message.
Much appreciated & Looking forward to serving!
George Dimov CPA
(833) 829-1120 toll free