International Tax Compliance
Experience with Complex Foreign Assets
M. Robinson & Company, P.C. is a recognized thought leader in Offshore Voluntary Disclosure Initiative (OVDI) representation. We are experienced in preparing a number of different information returns, which if not done correctly and filed timely can result in significant penalties to the taxpayer. These services include:
1. Reporting Foreign Gifts – Form 3520. Gifts in excess of $100,000 are reported on Form 3520.
2. Reporting Foreign Trusts – Form 3520. Beneficiaries report the distributions they receive from foreign trusts using Form 3520.
3. Reporting Transfers to Foreign Corporations – Form 926. Transferors must report the transfer of money and property to foreign corporations using Form 926.
4. Reporting the Activities of Foreign Corporations – Forms 5471/5472. The shareholders of foreign corporations must report the activities of their foreign corporation using Form 5471 and, in some cases, Form 5472.
Foreign Bank and Financial Account Reporting (FBAR)
You may be required to file an FBAR if:
- You are a U.S. citizen who owns bank and/or brokerage accounts outside the United States; or
- You are NOT a U.S. citizen, but you live in the United States and own bank accounts and/or brokerage accounts located outside the United States; or
- You have signature authority over a bank account or brokerage account located outside the United States.
Many people do not know that they must file an FBAR. Schedule B of Form 1040, line 7a asks if you “have an interest in or a signature or other authority over a financial account in a foreign country.” Line 7b asks you to list the name of the foreign country. Some people do not see this question, and others do not answer it truthfully. Also, some people may be confused because the FBAR is not part of the tax return, but is a separate form which must be filed electronically with FinCEN, the Financial Crimes Enforcement Network. The filing date for FBAR form was also a point of confusion. It was recently changed to April 15th for filings due in 2017, the same day as individual income tax returns.
More importantly, many may not realize that they have an obligation to report income earned by foreign bank or brokerage accounts. Because citizens and residents of the United States are generally taxed on their worldwide income, income on foreign bank and brokerage accounts must be reported on their annual income tax returns. A willful failure to disclose income from any source is subject to (possibly) severe criminal and civil penalties.
Based on our experience, it takes a great deal of time to prepare original or amended tax returns and FBARs for an 8-year period. It takes time to obtain the foreign account statements, translate them into English, properly account for transactions in foreign currencies, account for income from foreign mutual funds (Passive Foreign Investment Companies or ”PFIC”), trace money from account to account to minimize penalties, and, generally, to obtain and process all relevant information.
M. Robinson & Company, P.C. attorneys have extensive experience in assisting taxpayers in both the Offshore Voluntary Disclosure Initiative (OVDI) and Offshore Voluntary Disclosure Program (OVDP). Regardless of whether the taxpayer failed to disclose offshore income intentionally or because of a lack of understanding of U.S. income tax law, we can help.
Our services also include:
- Obtaining pre-clearance for a taxpayer’s inclusion into the OVDI so that the taxpayer will know that he or she has been accepted into the 2011 OVDI before providing incriminating evidence to the IRS;
- Preparing original and amended United States income tax returns that can withstand an IRS audit;
- Preparing original and amended FBARs that can withstand an IRS audit;
- Dealing with the often considerable penalties that the IRS will seek under the 2011 OVDI;
- Providing advice regarding how to “opt out” of the 2011 OVDI in order to reduce the amount of penalties while retaining protection from criminal prosecution;
- Obtaining sensitive information from foreign banks and brokerage companies;
- Assisting in accounting for transactions in foreign currencies; and
- Arranging an installment payment agreement if the taxpayer is unable to pay the entire balance immediately.
M. Robinson & Company, P.C. works with the taxpayer’s criminal defense attorney when criminal defense is required. The amount of the unpaid tax is a critical component in the United States Sentencing Guidelines. By minimizing the tax liability, consistent with law, we also help minimize possible criminal sentences.