The Essential Forms You Need for Foreign Gift & Asset Reporting

The reporting of foreign gifts, inheritances, assets, and corporation ownership required in the U.S. tends to confuse taxpayers.

What trips people up is that taxpayers are required to report certain foreign gifts, assets, and corporation involvement, even though they don’t actually have to pay taxes on them.

The issue is that failing to report – or reporting late – can really cost you in the form of big penalties.

Attorney Sammy Kim is an international tax expert who has helped many immigrant clients from all over the world file accurate foreign gift and asset reporting forms and reduce penalties for failing to report or reporting late.

Sometimes, it’s not so easy to find the right form for each reporting obligation.

Key Forms for Foreign Gift and Asset Reporting

Here is a review of some key forms needed for foreign gift and asset reporting:

IRS Form 3520: IRS Form 3520 is the form used to report a foreign gift, bequest, or inheritance. It applies to foreign gifts and inheritances greater than $100,000. Here is a primer on foreign gift reporting and what could happen if you don’t file Form 3520. And here are some important tips for filing this form.

IRS Form 3520-A: IRS Form 3520-A is a complex form for foreign trust reporting called the “Annual Information Return of Foreign Trust With a U.S. Owner.” This form must be filed every year by a foreign trust with at least one U.S. owner to give the IRS information about the trust, its beneficiaries in the U.S., and any U.S. person considered an owner of any part of the foreign trust.

FBAR (FinCEN Form 114): FBAR, or Report of Foreign Bank and Financial Accounts, is an annual reporting requirement for U.S. persons (citizens, residents, trusts, estates, and domestic entities) with foreign financial accounts. It includes bank accounts, investment accounts, grantor trusts, life insurance or annuity contracts with a cash value, and assets held in foreign branches of U.S. banks. Reporting is required for U.S. persons or entities if the total value of their foreign financial accounts exceeds $10,000 at any time during the year.

FinCEN Form 114 must be used to report if you have a financial interest in, signature authority over, or other authority over one or more applicable accounts. It is submitted electronically to the Financial Crimes Enforcement Network (FinCEN) bureau of the Treasury Department.

FATCA (Form 8938): FATCA, or the Foreign Account Tax Compliance Act, requires U.S. taxpayers who live in the U.S. to file Form 8938 with their federal tax return to report specified foreign financial assets. This filing is required if the total value of all of your specified foreign financial assets exceeds $50,000 on the last day of the tax year, or $75,000 at any time during the year (married filing jointly: $100,000 and $150,000, respectively). The filing thresholds are higher for U.S. expats living abroad, but they do have to file this form if applicable.

Like FBAR, Form 8938 filing requirements apply to assets held at foreign financial institutions, including bank accounts, investment accounts, grantor trusts, life insurance or annuity contracts with a cash value, and assets held in foreign branches of U.S. banks. Unlike FBAR, however, disclosure of foreign securities and stocks, and certain types of foreign business interests, is also required under FATCA.

Note: In some cases, you might have to file both FBAR (FinCEN Form 114) and FATCA (Form 8938) for the same account. Learn more here: FBAR & FATCA: Filing Requirements for U.S. Taxpayers with Foreign Finances.

IRS Form 5471: IRS Form 5471 is complicated information return that must be filed by U.S. persons who are officers, directors, or shareholders in certain foreign corporations if they own at least 10% of that foreign corporation. The form involves reporting the transactions that occurred during the foreign corporation’s annual accounting period ending with or within the U.S. person’s tax year, much like a profit-and-loss statement.

Need Assistance with Foreign Tax Forms or Related Penalties?

Foreign gift and asset reporting is complex, and filing the right forms with the right information on time is essential to avoiding significant penalties. Or you might already be facing penalties and don’t know where to turn.

If you need help with any issues related to foreign gift and asset reporting – or you are stuck with penalties and want to find a way to reduce them – speak to an experienced foreign tax attorney in the DMV Area now.