Posts

Sherayzen Law Office Successfully Completes October 2018 Tax Season

Sherayzen Law Office, Ltd., successfully ended yet another tax season. The October 2018 tax season presented formidable challenges not only due to the diversity of the issues involved, but also the sheer volume of deadlines that needed to be completed between September 16 and October 15, 2018.

Let’s analyze the October 2018 tax season in more detail.

October 2018 Tax Season: Diversity of Tax Forms

During this October 2018 tax season, the tax team of Sherayzen Law Office had to deal with highly diverse tax issues – as usual. Our team is very well-versed in foreign income reporting and US international information returns such as: FBAR and FATCA Form 8938, business tax forms (926, 5471, 8858 and 8865), foreign trust forms (3520 and 3520-A), foreign gifts & inheritance reporting (Form 3520 and other relevant forms), PFICs and others. All of these forms needed to be completed for the October 2018 tax season.

However, there was something very new this time – Section 965 Transition Tax. As a result of the 2017 tax reform, US owners of certain foreign corporations were forced to recognize as income the accumulated E&P of their foreign corporations at their ownership percentage. The Section 965 tax compliance added a significant burden to the October 2018 tax season.

October 2018 Tax Season: High Volume of Deadlines & High Diversity of Assets

Between September 16 and October 15, 2018, Sherayzen Law Office completed over 70 deadlines for its clients. As part of these deadlines, we filed about 50 FBARs and a similar number of Forms 8938, about two dozens of Forms 5471/5472 and a smaller number of Forms 8865, about a dozen of Forms 3520 and over 200 Forms 8621.

Numerous forms were filed to report foreign rental income as well as foreign dividend and interest income. The vast majority of the filed tax returns included Foreign Tax Credit calculations.

October 2018 Tax Season: Diversity of Countries

The reported assets belonged to a wide variety of countries. During the October 2018 Tax Season, Sherayzen Law Office reported assets from virtually all main areas of the world. The majority of assets were reported from the European (particularly: France, Germany, Italy and the United Kingdom) and Asian countries (especially, China, India and Thailand); a smaller number of assets reported for Canada and Latin America. The deadlines for most of our New Zealand and all of our Australian clients were completed prior to September 15.

Lebanon and Egypt stood out among the Middle Eastern clients.

Sherayzen Law Office is a Leader in US International Tax Compliance

Sherayzen Law Office is committed to helping our clients to properly comply with their US international tax requirements. Our highly knowledge and higher experienced tax team has successfully helped hundreds of clients around the world with their US tax compliance issues, including offshore voluntary disclosures of foreign assets and foreign income. Our successful October 2018 tax season is just another proof of our commitment to our clients!

Contact Us Today to Schedule Your Confidential Consultation!

Foreign Inheritance Form 8938 Reporting | Form 8938 Lawyers

Foreign Inheritance Form 8938 reporting has quickly turned into one of the most important tax reporting requirements despite being one of the newest tax forms that debuted barely four years ago in 2012 (for the tax year 2011). In this article, I will discuss when Form 8938 needs to be filed with respect to inherited assets. For the purposes of this article, I will only discuss Form 8938 with respect to the assets actually received, not the assets which are still in the estate. I will also avoid the discussion of Form 3520; it is important to note, though, that Form 3520 is likely to be one of the most relevant reporting requirements with respect to foreign inheritance.

Foreign Inheritance Form 8938 Reporting: Form 8938 Basics

IRS Form 8938 was created by the infamous Foreign Account Tax Compliance Act (FATCA) and, generally, it requires individual U.S. taxpayers to report what are known as “specified foreign financial assets” if the value of those assets exceeds the applicable reporting threshold.

It is beyond the scope of this article to explore Form 8938 filing requirements in detail, but, in essence, IRS Form 8938 requires the reporting of three types of assets. The first category consists of financial accounts maintained at foreign financial institutions. This category closely follows the FBAR reporting requirements (with important exceptions, such as signatory authority accounts) but requires U.S. taxpayers to disclose more information with respect to these accounts.

The second category is the requirement to disclose the ownership of a whole new set of classes of assets grouped together under the vague definition of “other foreign financial assets”. Basically, other foreign financial assets include classes of assets which are held for investment but not held in an account maintained by a financial institution. Such assets include stocks or securities issued by anyone who is not a U.S. person, any interest in a foreign entity, and any financial instrument or contract that has an issuer or counterparty that is other than a U.S. person.

Finally, Form 8938 requires the taxpayer to report whether he disclosed any assets on Forms 5471, 8865, 8621, 3520 and 3520-A.

It should be remembered that Form 8938 has its own set of independent penalties associated with Form 8938 noncompliance. These penalties are imposed in addition to penalties associated with FBARs, Form 3520 and other U.S. information returns.

Foreign Inheritance Form 8938 Reporting: Foreign Financial Accounts

If you received foreign bank and financial accounts as part of your foreign inheritance, you will need to disclose these accounts on Forms 8938 if the relevant filing threshold requirement is satisfied. In a foreign inheritance context, an issue often arises if you are an executor of a foreign estate and have signatory authority over the estate’s financial accounts. Whether Form 8938 would need to be filed for the accounts in this situation is a fact-dependent question and needs to be explored by an international tax attorney (though, in the great majority of cases, an FBAR would need to be filed in this context as long as the relevant reporting threshold is satisfied).

Foreign Inheritance Form 8938 Reporting: Other Investment Instruments

If you received other investment instructions as part of your foreign inheritance, your international tax attorney should explore whether these instruments satisfy the second category of reportable Form 8938 assets. Examples of other foreign financial assets include: a note, bond, debenture, or other form of indebtedness issued by a foreign person; an interest rate swap, currency swap; basis swap; interest rate cap, interest rate floor, commodity swap; equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty; an option or other derivative instrument with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; and other assets held for investment.

Foreign Inheritance Form 8938 Reporting: Foreign Business Ownership

The detailed exploration of the reporting of an ownership interest in a foreign business is beyond the scope of this article. Therefore, I want to briefly mention that, if you inherited an ownership interest in a foreign corporation, partnership or a disregarded entity, this interest may need to be reported on Form 8938. However, it is possible that this interest may also have to be reported on Forms 5471, 8865, 8858 and other U.S. information reports related to business entities. In this case, it is possible that you will only need to report on Form 8938 that the information regarding an ownership interest in a foreign entity was reported on Form 5471, 8865 and/or 8621.

The final decision on how a foreign business ownership needs to be reported to the IRS should rest with your international tax lawyer.

Foreign Inheritance Form 8938 Reporting: Foreign Trust Beneficiary Interest

The detailed exploration of the reporting of a beneficiary interest in a foreign trust is beyond the scope of this article. For the purposes of this article, let me just provide this brief and over-simplified summary – if you inherited a beneficiary interest in a foreign trust, you should report it on Form 8938 unless it is already reported on Forms 3520 and/or 3520-A (if the latter is the case, you just need to check the box on Form 8938 for the appropriate form on which the beneficiary interest was reported). Again, the decision on how to report your foreign trust beneficiary interest should rest with your international tax lawyer.

Contact Sherayzen Law Office for Professional Help with Your Foreign Inheritance Form 8938 Reporting

The U.S. tax requirements related to reporting of your foreign inheritance may be highly complex and it is very easy to run into trouble. This is why you need to contact Sherayzen Law Office for professional help. Our legal team is highly experienced in foreign inheritance reporting, including Forms 8938, 3520 (all parts of Form 3520: foreign trusts, foreign gifts and foreign inheritance), 3520-A, 5471, 8621, 8865 and other relevant forms. We have also helped U.S. taxpayers around the globe with the offshore voluntary disclosures with respect to late reporting of their foreign inheritance.

Contact Us Today to Schedule Your Confidential Consultation!

FBAR and Form 8938 Filings Continue to Grow

On March 15, 2016, the IRS announced that there was continuous growth in the FBAR and Form 8938 filings. While the IRS attributes this growth in FBAR and Form 8938 filings to the greater awareness of taxpayers, one cannot underestimate the impact of the FATCA letter and the increasing knowledge of foreign financial institutions with respect to U.S. tax reporting requirements.

Background Information for the FBAR and Form 8938 Filings

FBAR and Form 8938 are the main forms with respect to reporting of foreign financial accounts and (in the case of Form 8938) “other specified assets”. The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (commonly known as “FBAR”) should be filed by U.S. taxpayers to report a financial interest in or signatory authority over foreign financial accounts if the aggregate value of these accounts exceeds $10,000. This form is associated with draconian noncompliance penalties.

IRS Form 8938 was created by the famous Foreign Account Tax Compliance Act (“FATCA”). Generally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds the required thresholds (the lowest threshold is $50,000, but it varies by taxpayer). The noncompliance with respect to Form 8938 may result in additional penalties, including $10,000 per form.

IRS Registers Sustained Increase in the FBAR and Form 8938 Filings

Compliance with FBAR and, later, Form 8938 is one of the top priorities for the IRS according to the IRS Commissioner John Koskinen. Recent statistics with respect to the FBAR and Form 8938 filings support the conclusion that the IRS has been largely successful in achieving this task.

The IRS states that the FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCEN data. In fact, in 2015, FinCEN received a record high 1,163,229 FBARs.

Similar, but far less successful trends can be seen with respect to Form 8938 filings. In 2011, the IRS received about 200,000 Forms 8938, but the number rose to 300,000 by the tax year 2013. However, it seems to have stagnated at the same number judging from the statistics for the tax year 2014.

While the lower number of Forms 8938 could be explained by the novelty of the form as well as higher thresholds, it appears that some Forms 8938 might not also be filed due to mistaken calculation of the asset base used to determine whether Form 8938 filing requirements were met.

Nevertheless, overall, it appears that the FBAR and Form 8938 filings have grown sufficiently for the IRS to be satisfied with its progress.

Contact Sherayzen Law Office for Professional Help with Your FBAR and Form 8938 Filings

U.S. international tax law is incredibly complex and the penalties are excessively high. If you were supposed to file FBARs and Forms 8938 in the past, but you have not done so, you need to contact Sherayzen Law Office as soon as possible. Mr. Sherayzen and his legal team will thoroughly analyze your case, assess your potential tax liabilities, determine the available voluntary disclosure options, and implement (including the preparation of all legal documents and tax forms) the voluntary disclosure option that fits your case best.

Contact Us Today to Schedule Your Confidential Consultation!