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Im a Dual Citizen of Switzerland and US, I inherited money

I'm a Dual Citizen of...
I'm a Dual Citizen of Switzerland and US, I inherited money from my Mother (non US Person, residing in Switzerland). I have severall Questions:
a) Do I need to File the inheritance with the IRS, if yes, When do I do that? After everything is "done" in Switzerland or before?
b) If the Tax I need to pay is different in every state, which state do I have to look at? My Sister lives in NC, will i be taxed according to NC Law? How does that work?
c) How High is the %? Is there a table I can look up my inheritance sum and find out, how much I have to pay in the US? I live in Switzerland, so the Money goes from my Mom's Swiss Bank to my Swiss Bank account.... The US is not involved...
Thanks for your help!
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Answered in 22 minutes by:
5/2/2013
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,023
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Welcome. THANK YOU for choosing Just Answer. My name is XXXXX XXXXX my goal is to help make YOUR life, a little...LESS taxing.

Q: Do I need to File the inheritance with the IRS, if yes, When do I do that?

A: If the inheritance amount is more than $100,000, you will need to complete a Form 3520, which is an information return. No tax is due. You can refer to the link below for the Form 3520.

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Q: After everything is "done" in Switzerland or before?

A: The Form 3520 is filed at the time the 1040 is due. So, if you are inheriting this year, you will file the Form 3520 when you file your 2013 tax return.

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Q: If the Tax I need to pay is different in every state, which state do I have to look at?

A: North Carolina does not impose an inheritance tax, but the state does impose an estate tax, which will not be applicable to this matter. If your sister will be inheriting $100,000 or more, she is also required to complete the Form 3520.

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Q: .How High is the %? Is there a table I can look up my inheritance sum and find out, how much I have to pay in the US?

A: As there is no inheritance tax, there is no table to refer to.

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Link to Form 3520/instructions:


http://www.irs.gov/pub/irs-pdf/f3520.pdf
http://www.irs.gov/pub/irs-pdf/i3520.pdf


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** Please note that as you are a dual citizen, you should be filing a U.S. tax return every year. U.S. citizens are required to report their worldwide income. As there is a tax treaty between the U.S. and Switzerland, you will not be double taxed on your income, and you will likely qualify for the foreign earned income exclusion. **

Please let me know if you require further assistance relating to this matter.

Thank you again for using JUST ANSWER.

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Customer reply replied 4 years ago

Wow, thanks, Angela!


I have a few more Questions:


 


The Inheritance is more than $100'000:


If the State imposes an Estate Tax, how high will that be?


 


In Switzerland an Inheritance Case can take up to two Years. So I will file the Inheritance in the Year I received the Money on in the Year my Mother died (Then I don't know exactly how High the inheritance is...)


Up until now, I allways lived and worked in Switzerland, I have absolutely NOTHING in the USA (except my Sister, but no Money, Bank Account, House,...). I have allways earned a "normal" Paycheck here in Switzerland. When and How do I start Filing Taxes in the US, Is there someone who can help me? I am 28 Years old and I earn roughly 65K a year, minus the taxes I pay here, minus life insurance, etc....


How do I proceed at that point?


 


 

Hello again Joyce,

You are very welcome.

Q: If the State imposes an Estate Tax, how high will that be?

A: Again, the estate tax will not apply because the estate tax is imposed on residents of NC who pass away with estates that are valued at a certain amount. SEE BELOW:

If you are a North Carolina resident fortunate enough to leave a very large estate, worth millions, it may owe both federal estate tax and a separate North Carolina estate tax. The state exemption amount is tied to the federal one, which means that for deaths in 2013, estates with a total value of up to $5.25 million are exempt from both state and federal estate taxes. For 2012 deaths, the exempt amount was $5.12 million. The exempt amount will be indexed for inflation each year.

REFERENCE SOURCE:

http://www.nolo.com/legal-encyclopedia/north-carolina-estate-tax.html

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Q: In Switzerland an Inheritance Case can take up to two Years. So I will file the Inheritance in the Year I received the Money on in the Year my Mother died (Then I don't know exactly how High the inheritance is...)

A: You will file the Form 3520 the year that you actually receive the inheritance.

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Q: When and How do I start Filing Taxes in the US, Is there someone who can help me? I am 28 Years old and I earn roughly 65K a year, minus the taxes I pay here, minus life insurance, etc....

A: to become compliant, you will need to file the last 6 years of tax returns. In addition, if you have foreign financial accounts with a balance of $10,000 or more, you will need to report those accounts as well on the FBAR (Report of Foreign Bank and Financial Accounts), which the Form TD F 90-22.1. You will find more information relating to the FBAR at the following link;

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-%28FBAR%29

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Q: How do I proceed at that point?

A: I can imagine that all of these requirements may be a bit overwhelming, but if you seek the help of a reputable tax professional that has knowledge of U.S. tax laws, he/she should be able to assist you with all of this.

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I hope that this clarifies matters for you.

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Customer reply replied 4 years ago

OK, that clears a lot for me, thank you! Since my Sister lives in the US, she has a Person who helps her with her taxes, so I guess I'll just give that matter of filing taxes for the past 6 years to that person aswell, I hope this won't be such a huge matter, since I'm not the wealthiest person, not even here in Switzerland ;)
After that (I guess in 2014) I will file taxes for the inheritance with that 3520 Form.

Thanks a lot, I wish I had you at home for all my Follow Up Questions.


 


Oh! Just one more: When I "Walk up to the IRS" tomorrow, with my Forms, filing the last 6 years, is there any penalty I will face? How come, nobody EVER told me to file taxes in the US? How come the IRS never ever even wrote me a letter? Not filing taxes with my "normal" life in Switzerland, is or was that illegal?

Joyce,

I am glad that I was able to assist you with this matter. As your sister has a tax person here, that person should be able to assist you with your U.S. tax matters. It is best that you use a CPA or an EA to handle your matters since FBARS and the tax treaty are involved. As for cost, for the most part, tax professionals here in the U.S. set their own rates, most within reason, but you might find some who charge a bit more than others.
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Yes, you will file the Form 3520 in 2014 with the 2013 tax return.

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As far as additional questions, you can visit me again here at JA. My username is tax.appeal.168. As some customers are not aware, note that if you do have other questions in the future that do not directly relate to this matter, you are required to ask that question in a different thread.

---------------------------------------------

As for you never being contacted, the IRS does not do that. What they do is make information available to the general public and it is up to the public to know what they are required to do relating to tax matters. Up until recently the IRS was not pushing as hard to get foreign individuals who are required to file returns to file returns, but now they are. The number of people out there who are supposed to be filing tax returns, and FBARs, but are not, is a large number. My thought is that even if the IRS wanted to contact these people, they would not be able to.

Please remember to rate my answer and complete the survey. Rating my answer highly allows me to receive credit for assisting you, and your completing the survey helps me also.

Thank you again for using JUST ANSWER.
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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