More on the New Rules for Offshore Accounts

7:02 pm Asset Protection, Foreign Asset Protection, Offshore Trusts, Tax Planning

IRS Logo 150x150 More on the New Rules for Offshore AccountsA Wall Street Journal article last Saturday helps clarify the new reporting requirements for offshore assets as a result of the passage of the Foreign Account Tax Compliance Act (FACTA) in 2010.

The IRS released FACTA forms and guidance earlier this month, which requires a new tax filing for many with foreign accounts.  That new filing – via Form 8938 – must accompany 2011 returns and differs from the Foreign Bank Account Report that must be sent to the IRS by June 30 every year.

Taxpayers with foreign holdings must also include Form 8621 to report Passive Foreign Investment Company those holdings, which has largely been overlooked in the past.  According to the article, some commonly overlooked items that must be reported can include:

  • Non-U.S. based checking or savings accounts that “sweep” into a money-market account.
  • Proceeds from a parent’s life insurance policy left in an account overseas after the parent died.
  • Company retirement accounts outside the U.S., such as ORSO accounts in Hong Kong or Second Pillar accounts in Switzerland.
  • Funds deposited in a foreign account for a child who is living or working abroad. If the amount is more than $10,000 during the year, FBAR reporting is required.
  • Foreign trusts with a beneficiary that is a U.S. taxpayer.

Consequences for not reporting can be severe, and can include interest, penalties and past tax due.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

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