What are your tax responsibility if you are a U.S. Person?
If you are a U.S. Person for tax purposes, and let’s say you own a Foreign bank account with interest income, you MUST include your Foreign Bank account income even if it is ONE Dollar. So regardless if you earn that income that income on the Moon, Mars, another galaxy, per the U.S. Code Section if you are a U.S. Person, you are still subject to reporting that income for U.S. taxation purposes. A U.S. Person is responsible for reporting their worldwide Income. For instance, interest income from Non-US bank accounts, dividends, rental income, etc. ANYTHING that produces income for a U.S. Person, they have to report it and include it on to the U.S. Tax Return.
Also, keep in mind there are other Foreign reporting requirements as well, Such as Foreign Bank Account Reporting, If you have aggregate balance of USD 10,000 or more in Non-US Bank Accounts, Indian Provident Funds, Indian Public Provident Funds, Non-US Time Deposits, LIC Life Insurance Policies, Non-US Mutual Fund Transactions, you have to report that as well. If you have any questions regarding, please let me know.
So for example:
For 2014, the highest bank account balances were the following:
Foreign Bank Account: 4,000 US Dollars
Indian Provident funds: 3,000 US Dollars
LIC Life Insurance Policy with cash surrender value: 4,000 US Dollars
Aggregate balance for 2014: 11,000, Therefore, a FinCen Form 114 MUST be Completed since the aggregate balance is greater than USD $10,000.
There are also other foreign information returns that needs to be filed as well:
Form 8938 – Disclosure of certain foreign financial assets; filed with U.S. tax return.
Form 8865 – Disclosure of interests in certain foreign partnerships; filed with U.S. tax return.
Form 5471 – Disclosure of interests in foreign corporations; filed with U.S. tax return.
Form 3520 – Disclosure of certain transactions with foreign trusts and receipt of large foreign gifts/bequests; filed with U.S. tax return.
Form 3520-A – Disclosure of transactions with a foreign trust; due on March 15 but can be extended.
Form 8621 – Disclosure of interests in passive foreign investment companies; filed with U.S. tax return.
Modi CPA is a licensed Certified Public Accounting firm in the state of Texas in The Colony, TX and service clients in the DFW Metroplex area (Dallas, Addison, Lewisville, Plano, Garland, Forth Worth, Arlington, Richardson, McKinney) and throughout the United States. Furthermore, we are also International & Cross-Border Tax accountants whom look at US-Canada Tax Treaty, US-India Tax Treaty, US-Russia Tax Treaty, US-UK Tax Treaty, US-Egypt Tax Treaty, and others.
We are a qualified accounting firm to discuss Domestic, Cross Border Tax issues between multiple countries, and other International tax services to ensure your compliance with the United States’ International tax laws. Do not hesitate to contact our office should you have further questions. Our Phone number is (214)618-0468 and email is ravi@modicpa.com