FMH represents taxpayers in a variety of international tax issues including both controversy matters and planning.
International tax is a complex and unique area, and it can differ significantly from the laws governing domestic tax.
Compliance
Our team assists with compliance issues involving foreign financial accounts, foreign business interests and foreign income.
The United States has extensive requirements for U.S. citizens and residents to report interests in foreign financial accounts and foreign businesses. Often, this reporting must be done on a yearly basis and must be done regardless of whether the taxpayer has received any foreign income.
Some international reporting includes:
- foreign financial accounts (Forms 8938, FBARs),
- controlled foreign corporations (Form 5471),
- transfers of property to foreign corporations (Form 926),
- foreign partnerships (Form 8865),
- passive foreign investment companies (Form 8621),
- foreign trusts and foreign gifts (Forms 3520, 3520-A)
The penalties for failing to report foreign assets and businesses can be significant. In the case of FBARs, the penalty can be $10,000 per year for a non-willful violation but for a willful violation can rise to $100,000 or 50% of the account value.
The penalties for failing to file other forms can be $10,000 per year or more. For example, a continuing violation for failing to file Form 8938 can be up to $50,000.
The penalty for failing to file Form 3520 can be 35% of the gross value of any property transferred or distributions or 5% of the trust’s assets. Likewise, the penalty for failing to file Form 3520-A can be up to 5% of the trust’s assets. 26 U.S.C. § 6677
We assist clients in proactively approaching the IRS to resolve foreign reporting issues, such as through streamlined disclosures, sometimes with minimal or no penalties.
The IRS recognizes some limited defenses to these foreign reporting penalties, and we have helped clients successfully develop defenses and obtain partial or complete waivers of the penalties.
FMH also represents clients in IRS audits involving undisclosed foreign assets or income, or foreign informational reporting issues.
Planning
We advise U.S. citizens and green card holders on the tax consequences of living and working abroad which includes international reporting compliance, income tax planning, treaty planning, and totalization agreements
FMH attorneys also assist non-resident aliens (NRAs) with issues involving living and working in the U.S. or owning property in the U.S.
We advise clients on FIRPTA, FATCA, FDAPI/ECI, chapter 3 and 4 withholding, Puerto Rico’s Act 20 and Act 22 (now collectively Act 60) tax incentives, and other compliance issues.