Monday, March 12, 2012

Foreign Trust and Corporate Tax Returns Due on March 15th | Bellevue Tax Lawyer

March 15, 2012 is the filing deadline file for 2011 corporate tax returns (1120, 1120A, 1120S), to file an amended 2008 corporate return to claim a refund a refund, or to request an extension for 2011 using Form 7004.

March 15, 2012 is also the deadline to file foreign trust returns (Form 3520-A), or to request an extension using Form 7004.

Form 3520-A is required if a "US Person" is an "owner" of a foreign trust.  

A couple of examples of foreign accounts that could be treated as a trust are a Mexican FIDEICOMISO, and foreign retirement accounts that are similar in management or structure to a US IRA.

A Mexican FIDEICOMISO:
If you own land in a restricted zone of Mexico and are not a Mexican Citizen the Mexican Constitution prohibits foreigners from owning this type of property.  To get around this restriction the land is purchased through a Mexican trust called a Fideicomiso.  This purchase structure is treated as a trust by the IRS, creates a 3520 and 3520-A reporting requirement, and possibly other reporting requirements.

Update (Jan. 7, 2013): The IRS has stated that under some conditions this structure will not be considered a foreign trust.   The conditions to determine if the Fideicomiso is or is not a foreign trust depend on the individual facts and circumstances of each arrangement.  Please consult a tax professional to determine if you have a filing requirement.   

Foreign IRA Accounts:
Many foreign retirement plans are considered foreign trusts by the IRS.  If you have an interest in a foreign retirement plan there is a chance you need to file a 3520 and 3520-A.  If you aren't sure about an account contact a tax professional as the penalties for failing to file the required forms are harsh.  

In addition to these requirements, a taxpayer may have to report these accounts on the FBAR, and Form 8938.

If you have any questions please contact me directly or leave a comment.


As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes and tax law on the web.  Please do not rely on this article without consulting a tax professional.

Monday, March 5, 2012

5 European Countries Agree to Disclose Bank Information with IRS | Bellevue Tax Lawyer

The IRS recently announced that an agreement has been reached between the US, Germany, Britain, France, Italy, and Spain to collect and exchange information about accounts held in those countries with the IRS.  In return, the IRS has agreed to report information about US accounts held by residents of those countries with their respective authorities.  Furthermore, the IRS stated that more agreements similar to this one are currently being negotiated.

The agreement relates to the 2010 passage of the Jobs bill which includs the FATCA provision.  FATCA requires foreign financial institutions to enter into disclosure agreements with the IRS or face harsh penalties if the institution does not report this information.  The goal of FATCA is to insure that there is no gap in the ability of the US government to determine the ownership of US assets in foreign accounts.  As more foreign financial institutions and countries enter into these disclosure agreements with the IRS the likelihood that US owners of foreign financial accounts evading detection diminishes substantially.  

As stated in my previous posts on the OVDI, the IRS is encouraging US persons with foreign financial accounts to come forward and report the foreign accounts and income.  You should consider immediate action if you have accounts in one these countries, or any foreign country (for that matter), and haven't filed FBARs and/or reported income from foreign sources.  This action should start with reporting the income for this year and filing the FBAR and other required forms.  You should also speak with a tax professional to determine your exposure to other penalties and determine the best course of action to bring your status with the IRS into compliance.


If you have any questions please contact me directly or leave a comment.


As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes and tax law on the web.  Please do not rely on this article without consulting a tax professional.