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I have an offshore account in Guernsey. ( Iam a US resident not a citizen). My FA thinks I may have to declare this account although they are not sure if it qualifies as tax deferral. The fund value is between 40-50k
Already Tried: deciding whether I need to file form TD F 90-22.1
Hello bauhaus, If you are a US resident alien, then you are subject to the same tax rules as a US citizen. Any US citizen or resident alien who has signature power over a foreign account or accounts, must report the exitence of those accounts each year, if at any time during the year the total account balances of all such foreign accounts exceed the value of $10,000. The reporting is done on Form TDF-90-22.1. There is no tax due with this form. It is simply a reporting requirement to report the existence of such foreign accounts. If these accounts also earn income, the income is reported as taxable income on your US tax return. If this was helpful please press the Accept button. Positive feedback is also apprecited. Thank you bauhaus.
what about tax deferral? Don't I have to report the money only if I bring it into the country?.also I am a UK citizen, isn't there a taxation agreement between the US and UK which means I don't have to treat this as a "US Person"
Hello again bauhaus, I am not sure what you are referring to when you say "tax deferral". When you are a resident alien in the Unites States, you must report all of your income from all sources, and tax will be due on that income. There is a tax treaty that the US has with the UK, so you would be allowed to claim a credit for any tax that you paid to the UK on this same income, but it would need to be reported in the US. However, this only applies to actual income that you have, and not just money that you have sitting in a bank account overseas, assuming that money was earned before you became a resident alien here in the US. In other words, if you had $20,000 in bank account in the UK, and then came to the US to reside, you would need to report the existence of that account by filing form TDF-90.22.1 But you would not owe any tax on that $20,000. Now while you are here in the US if that bank account earns interest of $100 for the year, then you must report that $100 as income in the United States. The existence of the foreing accounts must be reported. You do not wait until you bring the money in to this country. And bringing the money in to this country in itself is not a taxable event. The only thing that is taxable is income you have while you are a US resident alien. You do not pay tax on money you already had in your name prior to coming to this country. If this was helpful please press the Accept button. Thank you bauhaus.
does foreign shares fall into the same category?Is there a deadline for filing this info?. My FA was mentioning a $10k penalty
Hello bauhaus, Yes, securities are covered by this same requirement. Any type of financial account you hold with a value of $10,000 or more during the year must be reported. The report is due each year by June 30th, and covers the preceeding calendar year. So the report for the 2009 calendar year is due on 6/30/2010. Yes, there can be penalties imposed up to the amount of the money you have in these accounts. However, the IRS rarely ever imposes such penalties. The reason for this is that many people are not even aware of this filing requirement, and the IRS is well aware of that. So unless you were willfully hiding hundreds of thousands of dollars in a foreign account, and not reporting the existence of that account, it is highly unlikely the IRS would impose any penalties on you. Your best course of action is now that you know about the form to start filing it each year, and continue to do so as long as these foreign accounts exist. If this was helpful please press the Accept button. Thank you bauhaus.
Accountant
25+ years tax consulting. Specializing in returns for US citizens living abroad