When President Obama was elected into office, he vowed to focus IRS efforts on taxpayers who had foreign assets. The latest tax act (Hiring Incentives to Restore Employment Act) made significant changes in reporting requirements for U.S. persons who hold foreign assets. Most significant is the automatic $10,000 penalty for failure to report ownership in “specified foreign financial assets” with an additional penalty if the failure continues for more than 90 days after a notification by the IRS. In addition, the three year statute of limitations for assessments of tax is extended to six years if there is an omission of gross income in excess of $5,000 attributable to a foreign financial asset, which may or may not be subject to information reporting.
Unfortunately, many taxpayers that are technically owners of “specified financial assets” are unaware of the reporting requirements.
The reporting requirements are effective for tax years beginning after March 18, 2010 and are required if you have an aggregate ownership of $50,000 or more in “specified foreign financial assets”, which include the following:
1) foreign financial accounts;
2) U.S. persons owning controlling interests in certain foreign corporations and partnerships;
3) reporting by U.S. persons of certain transfers of property to foreign entities and persons;
4) reporting by U.S. persons of organizations, reorganizations, and acquisitions of stock of foreign corporations;
5) reporting by U.S. persons of changes in foreign partnership interests; and
6) reporting with respect to foreign trusts with a U.S. grantor and foreign trusts distributing money or property to a U.S. person.
If the IRS determines that an individual has an interest in one or more foreign financial assets, but the individual does not provide sufficient information to establish the aggregate value of the assets, then the IRS may presume that the aggregate value of the assets have exceeded $50,000!
For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz