Tag Archive for Form 3520

U.S. Expatriates RESP Reporting Issues in Canada

Larry Stolberg

U.S. citizens (or even green cardholders) resident in Canada who are contributors (or a joint contributor) to their children’s RESP (Registered Educational Savings Plan) may have U.S. reporting issues.

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Forms Required By #Americansabroad 101 – The Explanation

John Richardson BNN

The following is a response to comments made about an article written by Rachel Heller on titled, “Why I renounced my US citizenship (Hint: it’s not because I’m avoiding taxes!).” The article was well written, interesting and attracted responses from Homeland Americans. (It was reproduced here and attracted even more comments.) The comments from U.S. residents demonstrated again that they do NOT understand the problems experienced by Americans abroad.

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Beyond The FBAR – Everything You Never Wanted To Know About All of The Other International Reporting Forms (But Must)

With all of the focus on FBARs and Form 8938s these days, it’s sometimes easy to forget about the other IRS international reporting forms. Below is a list of other important international reporting forms that relate to foreign asset reporting along with their penalties.

(1) Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts: Under IRC § 6048, taxpayers must report various transactions involving foreign trusts, including creation of a foreign trust by a United States person, transfers of property from a United States person to a foreign trust, and receipt of distributions from foreign trusts. This return also reports the receipt of gifts from foreign entities under IRC § 6039F. The penalty for failing to file each one of these information Read more

So What’s The New Buzz On Foreign Bank Accounts?

When looking for a picture for this post, I came across this one and remembered my college English Professor. She really loved the term, “Freudian Slip” for some reason! All I knew then was that Sigmund Freud was the father of psychoanalysis but I never quite understood how that related to a Business English class, unless that was the Professor’s way of telling us we were driving her nuts! Now I know that the term, “Freudian Slip” is a “mistake in speech that shows what the speaker is truly thinking” or “to do what one is truly thinking about”.

No, this post is not about defining psychoanalytic terms, dare I say more interesting than tax stuff? Not quite, but this post is about the latest buzz from the Internal Revenue Service, about some situations US taxpayers having foreign accounts might be in and their Read more

OVDP Hotline Nixes Practical Use of New Streamlined Program

The inflexibility of the IRS in the offshore area is starting to get some professionals down. I am one of them, but there are some others voicing similar frustration.

Taxpayers and professionals alike, were very pleased when the IRS announced the new Streamlined procedures in mid-June. You can learn more about the new Procedures here.

It seemed that sensibility and reason were beginning to prevail over at the IRS! Finally, “benign actor” (as opposed to “bad actor”) taxpayers with undisclosed offshore assets, could obtain relief and come into tax compliance without driving themselves into both fiscal and physical bankruptcy. Read more

How To Treat Gifts And Bequests From Foreign (Non-US) Persons

If you are a US citizen or resident and you receive gifts or bequests (generally, an inheritance or gift of property by a Will) of money or other property from a foreign (non-US) person or entity, you may need to report these gifts on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Form 3520 is an information return, not a tax return. Many people receiving gifts or bequests get very confused. They mistakenly believe that they have to pay tax when they receive a gift or bequest. This is not the case – bona fide gifts or bequests are not subject to income tax in the hands of the recipient. This remains the case regardless of whether the person giving the gift is a US person or a foreign person. It remains the case regardless of the amount of the gift or bequest. Read more

Statute of Limitations Remains Open Forever For Any Return Which Fails to File An Associated Information Report!

Taxpayer spend some of their time monitoring when the statute of limitations expires for certain tax return exposure items. This means watching the calendar until you are clear of audit. Unless you skip filing taxes entirely, you might assume your risk of audit eventually passes.

Taxpayers with a unreported income from a foreign bank account find that this situation is tough to resolve. The safest approach is going into the IRS Offshore Voluntary Disclosure Program, although some clients opt for more aggressive approaches.

Failure to file any one of the various foreign information reporting forms (e.g. 5471, 3520, 8838, etc.) leaves the statute of limitations open for every item in the associated federal Read more

Rescued From The Brink of Insanity: Practical And Sound Advice For Making The Decision To Opt Out of The OVDI – Part II

Hypotheticals Demonstrating When Opting Out is Detrimental To the Taxpayer –

Under what circumstances might opting out of the OVDI be detrimental for the taxpayer? Below are two examples.

Example 3: Large Unreported Gain

Kevin is a U.S. citizen. In 2008, he opened a checking account in Country A with funds upon which U.S. taxes were previously paid. Kevin owned an apartment building in Country A that he sold in 2008. However, Kevin failed to report the gain from the sale of that building on his tax return. Read more

US Tax – International Provisions: KISS – Keep It Simple Sweetheart

On Tuesday, December 3, the American Bar Association, Section of Taxation: United States Activities of Foreigners & Tax Treaties Committee (“Committee”) submitted to Congress various “Options” offering proposals for simplification and clarification of various international tax provisions of the Internal Revenue Code. The Committee made some excellent suggestions and one can only hope Congress will take heed. The Committee noted that a remedy is needed to remove many “traps for the unwary” and to ease compliance burdens that cannot reasonably be met.

Tax professionals can learn a great deal about the current law in the areas discussed by reading this proposal. Tax traps are carefully pointed out and the proposal should be required reading for practitioners involved with international tax issues. Read more

US Tax Laws Pushing Americans to Expatriate; OVDI “Arbitrary and Capricious” – An Interview With Bill Yates – Former Attorney, Office of Associate Chief Counsel (International), IRS, continued…

TaxConnections Picture - Statue Liberty and FlagToday’s blog post completes the interview with Willard (Bill) Yates, who recently retired from the Office of Associate Chief Counsel (International), Internal Revenue Service after 31 years of service. During his tenure as a Chief Counsel Attorney, Bill was the recipient of 10 awards, including the Albert Gallatin Award, Treasury’s highest career service award. The Gallatin is awarded only to select federal employees who served twenty or more years in the Department and whose record reflects fidelity to duty. Bill received the Gallatin award for his work throughout his IRS career, including his work on implementation of some of the compliance requirements of the Foreign Account Tax Compliance Act (FATCA).

Most of Bill’s career at IRS focused on offshore compliance, including his participation in a massive overhaul of outdated foreign trust reporting requirements Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner). Bill was the principal drafter of the regulations under section 679, Foreign trusts having one or more United States beneficiaries, Notice 2003-75, RRSP and RRIF Information Reporting and Notice 2009-85, Guidance for Expatriates Under Section 877A.

Our focus for this series will be on Bill’s comments on the American Citizens Abroad working paper titled, RBT, Residence Based Taxation: A Necessary and Urgent Tax Reform (RBT Proposal), which recently was submitted to the International Tax Reform Working Group of the House Ways and Means Committee. Read more

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