Taxpayers who participate in international transactions potentially subject themselves to a panoply of international information return filing obligations. Take this simple example. John, a U.S. citizen, establishes and funds a foreign grantor trust. After creating the trust, John also travels to the foreign jurisdiction and sets up a foreign bank account in the foreign trust’s name. John’s activities seemingly do not amount to much—that is, unless you look at his international information return filing obligations. Under this simple example, John’s foreign activities have likely caused four separate information return filing obligations, including Form 3520, 3520-A, Form 8938, and FBAR. Yes, that is four potentially applicable information returns and therefore four potentially applicable civil penalties that John may have to pay if each return is filed late. Worse yet, John’s reporting requirements probably carry forward into subsequent tax years, potentially exposing John to even more civil penalties if those information returns are not timely filed.
As the world has grown smaller, more taxpayers similar to John have found themselves subject to these international information return reporting rules. Currently, there are reporting rules for almost any international transaction, ranging from receipt of a foreign gift (Form 3520), ownership or control over foreign corporations and partnerships (Form 5471 and Form 8865), contributions to and distributions from a foreign trust (Form 3520), ownership or deemed ownership over a foreign trust under the grantor trust rules (Form 3520-A), and interests in financial assets and foreign accounts (Form 8938 and FBAR). There are more, but this should give you a good idea of the breadth of these information return reporting obligations.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.