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Lev
Lev, Tax Advisor
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Hi, What type of foreign account is requird to report? Is

Resolved Question:

Hi,

What type of foreign account is requird to report? Is it dependent on the amount held?

Is there capital gain, simple interest to report like from accounts held in the US financial institutions?

Is the report on the 1040 form enough?

Does a minor need to report a foreign bank account on his name if he does not file a 1040 since he does not have income?

Thanks

K
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome to Just Answer!
If you are an US citizen or US resident for tax purposes - you will report all your worldwide income - regardless if that income is earned in the US or abroad.

In additional you should report a foreign account by

(1) completing boxes 7a and 7b on Form 1040 Schedule B - http://www.irs.gov/pub/irs-pdf/f1040sb.pdf .

(2) you are a subject of FBAR reporting if a foreign account value is above $10,000. The form to use is TD F 90-22.1 - this form is mailed separately. There is no tax associated with these reporting.

(3) you need to file form 8938 - if your amount is more than $50,000 www.irs.gov/pub/irs-pdf/f8938.pdf - that form is attached to your tax return.

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts.

 

Reporting is required if you have an interest in specified foreign financial assets. A specified foreign financial asset is:

-- Any financial account maintained by a foreign financial institution, except as indicated above

--Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:

  • Stock or securities issued by someone other than a U.S. person
  • Any interest in a foreign entity, and
  • Any financial instrument or contract that has as an issuer or counter party that is other than a U.S. person.

Financial interest: you are the owner of record or holder of legal title; the owner of record or holder of legal title is your agent or representative; you have a sufficient interest in the entity that is the owner of record or holder of legal title.

Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.

If you a custodial for the minor - you need to file the form for the minor as a holder of legal title and for yourself - because you have authority to control.

 

See for reference

http://www.irs.gov/businesses/corporations/article/0,,id=251217,00.html

http://www.irs.gov/businesses/article/0,,id=255986,00.html

Let me know if you need any help or clarification.

Customer: replied 2 years ago.
Lev,

Thank you for your timely response. It seems that real estate holding overseas need not be reported, correct?

If the assets of a minor is held by a trustee who is not me, or a US citizen, is the minor exempt from FABR reporting?

If taxes on income are paid at the source to a foreign government all the above reporting is still required, it is just a deductible item on the
8938 form, correct?

Thanks

Kobi

Expert:  Lev replied 2 years ago.

Thank you for your timely response. It seems that real estate holding overseas need not be reported, correct?
That is correct - only financial accounts are reported. If you own a real estate property - no need to report that.
If the assets of a minor is held by a trustee who is not me, or a US citizen, is the minor exempt from FABR reporting?
The minor is not exempt from reporting. Whoever is in charge of minor's financial affair would take care for reporting. Mainly that is a responsibility of parents.
If taxes on income are paid at the source to a foreign government all the above reporting is still required, it is just a deductible item on the 8938 form, correct?

The form 8939 is only report the fact of having financial accounts - it has nothing to do with taxable income.

The taxable income is reported on the tax return - US citizens should use form 1040 and report all worldwide income.

However - if the same income is taxable abroad and in the US - you may claim a credit for taxes paid abroad - so the same income would not be taxed twice. Use the form 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdf
The credit is limited by the US tax liability on the same income - the form 1116 is used to calculate the amount of credit. Means - if tax liability abroad is higher - there will not be US taxes on that income, but if tax liability abroad is lower - in the US you will pay the difference after the credit will be applied.

 

Let me know if you need any help.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23192
Experience: Taxes, Immigration, Labor Relations
Lev and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Lev,

Is a US citizen forbidden to have an investment account of mutual funds and stocks kept overseas and traded on a foreign stock exchange or a US stock exchange?

FBAR reporting is required if a foreign account value is above $10,000, but I can have multiple accounts all less than 10k and be exempt from FBAR reporting, correct?

Thanks

Kobi


Expert:  Lev replied 2 years ago.
Hi Kobi and welcome back!

Is a US citizen forbidden to have an investment account of mutual funds and stocks kept overseas and traded on a foreign stock exchange or a US stock exchange?
Absolutely not forbidden - any US citizen may use the money as he/she wants. Funds may be kept in the US or overseas, may be invested in any type of financial account, etc.
However - that is very important - all worldwide income should be reported on the US tax return.

FBAR reporting is required if a foreign account value is above $10,000, but I can have multiple accounts all less than 10k and be exempt from FBAR reporting, correct? That is not correct interpretation. Any United States person who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

Let me know if you need any help.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23192
Experience: Taxes, Immigration, Labor Relations
Lev and other Tax Specialists are ready to help you

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