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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I am American citizen, have worked in Switzerland for several

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I am American citizen, have worked in Switzerland for several years and my tax home is is Switzerland.
When I retired I received a very important final settlement and paid taxes after this income.
I reaches an agreement with my former employer to leave part of my final settlement in their treasury for a few year with guarantied principal and a small payable at liquidation.
I know I will have to report the ineptest as revenue and pay taxes when received. However, my question is:
Do I have to report the Money which stays in the treasury of my former employer in the form of Foreign Asset (like a Foreign Bank Account) in Form F 90-22.1 ?
Please let me know.
Bob

Lev :

Hi and welcome to our site!
There is no requirement to report foreign assets.
However - most likely - the amount you choose to keep with your former employer must be included into your income. Under IRS regulations - you should include in the gross income all items of income you actually or constructively receive during your tax year.
You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it.
In additional - you will report interest and earnings credited to that account every year these amounts are credited regardless if the money are distributed to you or not.
For the FBAR reporting purposes - according to instructions - a financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares n a mutual fund or similar pooled fund.
Based on your information - your accounts represents an annuity and as such is subject of FBAR reporting.

Lev :

Please be aware that taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement.
The current filing threshold is generally $50,000.

Customer:

I understand that I have to report the Income, I have already reported and will report the interest when it becomes payable.

Customer:

My question is if I have to file a FBAR form for the Money I left with the company like it would be a Foreign Bank account TD F 90-22.1 ?

Lev :

Based on your information - your accounts represents an annuity and as such is subject of FBAR reporting.

Lev :

The account itself is subject to reporting, but the contents of the account do not have to be separately reported.

Customer:

It is not an annuity. or is it? Instead of taking the Money I received and paied taxes on it,I simple left it with the Company for future use. They only guaranty the principals and a very small interest at withdrawal if momey stays with them for 10 years. There is no interest payment in between.

Customer:

wait for response, are you still on line ?

Lev :

For specific details of FBAR reporting requirements - see here - http://www.gpo.gov/fdsys/pkg/FR-2011-02-24/pdf/2011-4048.pdf
"with guarantied principal and a small payable at liquidation" - that seems as an annuity. But sometimes there is no clear determination.
That is clear a financial account in which you own the interest have have a signature authority.
According to regulations - United States persons are required to file an FBAR if:
1.The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2.The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
So far - based on your information that account is subject of reporting.

Lev :

In additional - reporting will NOT trigger any additional tax liability.

Customer:

Thank you it is clear.

Lev :

You are welcome.

Lev :

When do you have an interest in an account or asset? If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return.
So far - you clear have an interest in an account - and such account is subject of FBAR reporting.
See IRS publication 575 - Annuity. An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year.
So based on your information your account might be classified as annuity.

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