International Tax Penalties

Reporting On International Interests

 

Jed has experience advising clients who have failed to file certain tax forms that require disclosure of foreign interests. These forms include:

FinCEN Form 114, which requires the reporting all foreign financial accounts, whose value exceeded $10,000 at any time during the calendar year, if the taxpayer had a financial interest in, signature authority or other authority over the accounts

Form 1040NR, U.S. Nonresident alien income tax return, which requires the reporting of U.S. source income by a foreign person

IRS Form 3520 which requires the reporting of transactions with a foreign trust (i.e., distributions) or gifts provided by a foreign person (or foreign business)

IRS Form 3520A which is required to be filed by a trustee of a foreign trust or the U.S. “owner” of a foreign trust

IRS Form 5471, which is required to be filed by a U.S. person who has an interest in certain foreign corporations

IRS Form 5472, which is required to be filed by foreign-owned sole member limited liability company and foreign corporations with U.S. source income

IRS Form 8938, which is required to be filed by individuals who own foreign assets

IRS Form 8865, which is required to be filed by individuals who have an interest in a partnership outside of the United States

 

Getting Help With Foreign Financial Interests

 

The rules regarding these forms are incredibly complex. Yet, the IRS can impose very significant penalties on individuals who fail to file the proper forms in a timely manner. Taxpayers who fail to report their foreign financial interests subject themselves to potentially enormous civil penalties. Many times, the taxpayer has no choice but to pay the penalties before they can challenge the IRS’s determination. Further, in many cases, a taxpayer’s entire tax return can still be audited until the correct international reporting forms are filed.

The IRS has a number of amnesty programs that are open to taxpayers. The availability of the specific amnesty programs depends on which form is unfiled, where the taxpayer lives, and how much (if any) tax is owed. In some cases, the taxpayer will need to certify in writing that the failure to file the relevant forms was non-willful (i.e., a mistake).

Jed can help the following types of taxpayers

 

  • U.S. citizens living and working abroad
  • U.S. citizens and other U.S. residents with foreign-sourced income
  • Foreign persons with U.S.-sourced income
  • Foreign trusts with U.S. beneficiaries especially U.S.-based settlors
  • U.S. and non-U.S. entertainers with worldwide income expatriates

 

Amnesty programs including the Offshore Voluntary Disclosure Program and the Streamlined program