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What you need to know if you have foreign bank accounts

The Rules Have Changed!   What you need to know if you have foreign bank accounts.

Over the past few years, the IRS has instituted aggressive rules to force Foreign Financial Institutions (FFIs) and Non-Financial Foreign Entities (NFFEs) to enter into FATCA (Foreign Account Tax Compliance Act) agreements which require compliance with strict reporting requirements on the assets and financial accounts of all US taxpayers.  Owners of offshore accounts, thinking their assets are safe, might be at risk of heavy penalties.

How International Tax Treaties Effect US Citizens

The Effects of Treaties on U.S. Citizens and Residents

Under international tax treaties, cooperating nations provide certain tax concessions to each other’s residents. The U.S. is a party to many bilateral income tax treaties. As a result of such agreements, a U.S. citizen residing in the United States may benefit from reduced taxation or exemption from taxation on income from foreign sources. Similarly, nonresident aliens and foreign corporations enjoy rate reductions and exemptions from U.S.

Streamlined Procedures for Taxpayers Residing Outside the US

Streamlined Procedures for Taxpayers Residing Outside the US

The streamlined procedures have a different set of requirements depending on whether the taxpayer currently resides within or outside of the United States. If you are eligible to use the Streamlined Foreign Offshore Procedures, then you must follow particular steps. If you fail to properly comply with the steps, then your application will be rejected for the streamlined procedures. Instead, your tax return will simply be processed in the usual manner and you will not be able to avail yourself of any of the benefits of the streamlined foreign offshore procedures.

Simple Steps for Using Streamlined Foreign Offshore Procedures

Simple Steps for Using Streamlined Foreign Offshore Procedures

Applicants eligible under the Streamlined Foreign Offshore Procedures must follow particular steps to ensure that their returns are processed under the special program. If the taxpayer does not complete the process in a satisfactory fashion, the taxpayer will not be able to take advantage of the streamlined foreign offshore procedures.

The Simple Steps to Using the Streamlined Domestic Offshore Procedures

The Simple Steps to Using the Streamlined Domestic Offshore Procedures

If you are eligible to use the Streamlined Domestic Offshore Procedures, then you must follow particular steps. If you fail to properly comply with the steps, then your application will be rejected for the streamlined procedures. Instead, your tax return will simply be processed in the usual manner and you will not be able to avail yourself of any of the benefits of the streamlined domestic offshore procedures.

Foreign Entities Subject to Reporting Rules On Financial Accounts of U.S. Persons

Foreign Entities Subject to Reporting Rules On Financial Accounts of U.S. Persons

The IRS has instated some very aggressive rules to force Foreign Financial Institutions and Non-Financial Foreign Entities to enter into FATCA agreements and fully comply with new strict reporting requirements on the assets and financial accounts of US persons.

Withholding Rules Involving Foreign Accounts of U.S. Persons

Withholding Rules Involving Foreign Accounts of U.S. Persons

Reporting by Foreign Entities on Financial Accounts of U.S. Persons

In 2010, Congress enacted a series of international tax laws designed to require foreign financial institutions (FFI) and other nonfinancial foreign entities (NFFEs) to provide information about accounts and interests held by U.S. persons. These regulations generally apply to payments made after 2010 (1).

Gifts from Foreign Corporations Included as Gross Income

Gifts from Foreign Corporations Included as Gross Income

When a U.S. person receives certain gifts or bequests from foreign corporations, those amounts may be considered as part of the U.S. person’s gross income under US International Tax regulations. The Internal Revenue Code’s regulations specifically state that when a “purported gift or bequest” is received “directly or indirectly,” the amount is included in the U.S. person’s gross income “as if it were a distribution from the foreign corporation” (1).

Foreign-Owned Business Reporting Requirements

Foreign-Owned Business Reporting Requirements

Foreign corporations engaged in business in the United States must comply with particular record-keeping and international tax reporting obligations under the Internal Revenue Code. The code sections pertaining to foreign-owned domestic corporations and businesses also apply to U.S. taxpayers who engage in business with these companies. These rules are enumerated under IRC §§ 6038A and 6038C, which were enacted in the 1980s and later strengthened and expanded throughout the 1990s.

Limitations on the Use of Foreign-Based Documentation in Tax Litigation

Limitations on the Use of Foreign-Based Documentation in Tax Litigation

The Internal Revenue Code places certain limitations on the taxpayer’s ability to present foreign-based documentation during tax litigation. These rules exists so that taxpayers who fail to produce certain items during audit procedures cannot rely upon those unproduced documents at a later date.

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