Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has released a fact sheet discussing the reporting requirements of U.S. taxpayers who set up, own, receive distributions from or transfer money or property to a foreign trust. The fact sheet is part of an IRS series on the international tax gap. The IRS stresses that, although there are legitimate reasons why a U.S. person may be involved with a foreign trust, transactions with the trust could subject the taxpayer to U.S. tax consequences and cause the taxpayer to incur filing requirements.

  A taxpayer who sets up or contributes money or property to a foreign trust, receives distributions from a foreign trust, or receives certain gifts or bequests from foreign entities is required to file Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. In addition, a foreign trust with a U.S. owner is required to file Form 3520-A. Other potential reporting requirements include: Form 1040, Schedule B, Part III, Foreign Accounts and Trusts; TDR 90-22.1: Report of Foreign Bank and Financial Accounts; Form 709, Gift Tax Return; and Form 1040NR. The IRS also explained the tax consequences of different types of transactions between a foreign trust and U.S. taxpayer and warned taxpayers against using offshore schemes aimed at avoiding or deferring U.S. taxation.

IRS Fact Sheet: Foreign Trust Reporting Requirements