Foreign Inheritance: US Taxation & Reporting | Form 3520 | International Tax Lawyers Austin

/in /by

Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I’m continuing a series of vlogs from Austin, Texas. Today, I’d like to talk about a previous client experience here in Texas. I had a client from the United Kingdom who received foreign inheritance and it was not reported, neither were the assets he received in the subsequent years on FBAR, Form 8938 and Form 8621 for PFICs obviously.

We were talking about this situation where he essentially was deeply in noncompliance. We resolved all of the PFIC issues in a very interesting way. It was from awhile ago from the old OVDI program from 2011 and in that case, were were able to choose a different PFIC calculation methodology, mark to market which resulted in recognition of significant losses for the client which pretty much which pretty much wiped out his US income tax liability.

Of course, he still needed to pay the OVDI penalty on his foreign assets but we were able to put them in a middle category where his reporting and his penalty was also lower than what it would’ve been otherwise. That is in essence an old but very memorable case because of the fact that it came from the United Kingdom with respect to such a wide array of reporting requirements: foreign inheritance, FBAR, 8938, 8621. The only thing he didn’t have were foreign businesses; otherwise that would’ve been even more of a complicated case because a lot of rules were in flux at that point that gave a lot of opportunities with respect to lowering his income tax liability and his offshore penalty.

In the next vlog, I will continue talking about my prior client experience here in Austin, Texas.

Thank you for watching, until the next time.

Foreign Inheritance & US International Tax Issues | Form 3520 Lawyer & Attorney Austin Texas

/in /by

Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I’m continuing my series of blogs from Austin, Texas. In this series of blogs, I’m talking about the US tax reporting requirements that concern immigrants who came to live and work in Austin.

Today, I would like to discuss a very important topic of foreign inheritance. Foreign inheritance, as I’ve said in one of my seminars, is a Pandora’s box of US tax reporting requirements because it’s not only about the reporting of foreign inheritance itself, but also the continuous reporting requirements that may stem from the original foreign inheritance. These reporting requirements may continue for many many years and can be very diverse; so let’s discuss first things first.

Is foreign inheritance taxable in the United States? The answer is usually ‘no’. Of course, US situs property inherited in the United States may be taxed in the United States and the reporting and taxation requirements, will apply to the foreign estate, not to the person who inherited the asset.

The second question is: Is foreign inheritance reportable in the United States? The answer to this question is absolutely, yes. It is highly important that you disclose your foreign inheritance in a timely manner here in the United States. Failure to do so on form 3520, may lead to the imposition of absolutely humongous penalties, up to 25% of the foreign inheritance. I have seen personally, where the IRS imposed penalties like these and I had to fight them.

The other aspect that I mentioned, are the reporting requirements that are associated with foreign inheritance, because usually people inherit assets. That means foreign assets; that means sometimes foreign financial accounts. It may mean foreign businesses; it may mean a foreign trust or beneficiary interest. It may mean other foreign financial assets likely bonds or bond certificates; it also may mean real estate. These foreign assets, which were inherited, may have and usually do have special reporting requirements associated with each of these assets and sometimes, even if they don’t, aside from the Form 3520 reporting of inherited real estate, there may not be any other reporting requirements for the real estate because personally, there may be income tax reporting requirements that are tied to your Form 3520 compliance and may reappear all of a sudden 10, 15, 20 years later.

In some cases, a foreign inheritance may be tied to an IRS audit and there, it could be very significant. For example, I’ve had audits where we had to go back to the 1980s with respect to foreign inheritance and establishing the fair market value of those assets.

Foreign inheritance is not just one reporting requirement; it’s a whole family of reporting requirements that may come in sometimes at the time of a foreign inheritance as well as after the foreign inheritance.

If you would like to learn more about your foreign inheritance reporting requirements, you can contact me at [email protected] or call me at (952) 500-8159.

Thank you for watching, until the next time.

Taiwanese Bank Accounts & Corporation Voluntary Disclosure Case | FBAR 5471 International Tax Lawyer

/in /by

Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I’d like to talk to you about a case that I completed about a year and a half ago with respect to a Taiwanese corporation. The case initially, came to me as a couple, an American who married a Tawainese woman, who have lived in the United States for awhile and she eventually became a permanent resident of the United States (still not a Citizen of the United States) and she had foreign bank accounts about which she had no idea because she gave her mother the Power of Attorney to open up bank accounts in her name.

This is very common in Southeast Asia where parents take liberties with their children’s finances and often times, they would open up bank accounts without their knowledge. Eventually on one of the trips to Taiwan, she found out from her mother that there were bank accounts that she needed to account for. She started researching what she needed to do with respect to those accounts in the United States and eventually found out about FBAR and the foreign income reporting, Form 8938 reporting, etc. etc. After that, she came to me to fix the problem.

While we were doing this voluntary disclosure, we discovered through a series of indirect hints that something else was going on there. Eventually, it turned out that her father assigned 50% of a Taiwanese corporation to her, also without her knowledge. Now in addition to FBAR, Form 8938 and foreign income reporting, and actually also PFIC reporting; she also needed to file a Form 5471 and she also needed to account for her Taiwanese corporation on Form 8938 because she is a minority owner; it’s not a controlled foreign corporation, so the Form 5471 was not required in some of the years; it was only required in the first year.

Eventually we completed the voluntary disclosure and it went through just fine but this is an important lesson to learn, that in a voluntary disclosure, you never know what kind of surprises may come in, even something as unexpected as ownership of a foreign company.

In the next blog, I will continue review of a series of cases that I’ve done for Asian Americans and Asians who became US Tax Residents.

Thank you for watching, until the next time.