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by: Anthony Parent 2013-01-29
We have written a lot in the past about the FBAR -- Report of Foreign Bank Accounts, the form on which you annually report any foreign bank or financial accounts if you had more than $10,000 during that year. There is a lot of focus on the FBAR, but in fact, that is not the only foreign interest reporting form that is the basis for substantial penalties.
We are starting to see a lot more interest in other, similar foreign interest filing forms that are used for reporting other types of interests that are located overseas. All of these are part of the IRS's coordinated effort to collect information about U.S. persons' overseas financial accounts and investigate potential tax evasion using overseas financial information. These include interests in corporations, partnerships, trusts, and certain transfers of property.
Here's our breakdown of the different form numbers and their application:
These foreign interest filing forms are all information returns, meaning they do not calculate any tax but are a document that is simply for the IRS's information. These are in addition to any tax forms an individual, business, or other entity may have to file to report income and pay tax.
Foreign Interest Reporting Forms are among the most complex the IRS has to offer, and require meticulous record-keeping and data entry. Knowing whether a person or entity is required to file can be a difficult determination. Furthermore, the penalties for failure to file are extremely steep:
If these failures to file have occurred due to reasonable cause, we have been able to help taxpayers file previous information returns and receive penalty abatements for failure to file. This is in the case of failure to file information returns only--if you have failed to file information returns and have a tax liability due to previously unreported foreign transactions or income, you may need to participate in the Offshore Voluntary Disclosure Program in order to protect yourself from steep penalties or other consequences.
The good news is that those who have failed to file any of the above Foreign Interest Reporting Forms and have unreported income may also enter into the IRS Voluntary Disclosure Initiative. If you have any unfiled reporting requirements, contact us. We can help.