Inherited Offshore Accounts

Inherited Offshore Accounts

Inherited Offshore Accounts: Have you inherited offshore accounts? The inheriting foreign money rules are hard. In addition, offshore asset filing and disclosure requirements are complex. If a U.S. person inherited Foreign Accounts or Overseas Assets, they have various FBAR Filing and Form 8938 foreign asset reporting requirements. These are disclosed on various international reporting forms. The most important foreign account requirement is generally the FBAR. The FBAR Filing Requirement  kicks when a deceased person leaves a foreign account to another person, who now has ownership, co-ownership, or signature authority over the account. In addition, there are other requirements, such as the Form 8938, PFIC (Passive Foreign Investment Companies), Schedule B, and more, including:

  • Form 3520 (Gift)
  • Form 3520-A (Foreign Trust)
  • Form 5471 (Foreign Corporation)
  • Form 8865 (Foreign Partnership)

In recent years, the Internal Revenue Service has taken an aggressive approach to foreign accounts compliance, so timely reporting is crucial.

Inherited Offshore Accounts

You inherited offshore accounts, now what?

After Inheriting Foreign Accounts & Offshore Assets, a U.S. person will now have a various reporting requirements. These reporting requirements will vary based on the type of account or asset, and whether it generates any income. While the FBAR carries the stiffest penalty and has a (relatively) low  threshold requirement for reporting, the form is not too overwhelming, if you can avoid these common mistakes. Likewise, the Form 5471 can be highly complex, with the IRS estimating the time for completion at around 30 hours.

FBAR for Inherited Offshore Accounts & Overseas Assets

FBAR is the Foreign Bank and Financial Account Form. The FBAR form must be filed electronically. FBAR Filing can be complicated, depending on the specific FBAR Filing requirements of the filer. For example, if a person has one savings account in Taiwan, the reporting is not that bad. But, if a person has 50 accounts, life insurance, mutual funds, and foreign life insurance — the FBAR filing may be much more complicated. The FBAR filing deadline is relatively forgiving. Unless the IRS and FinCEN change the current FBAR filing deadline rules, then the FBAR is due when your tax returns are due (April or June). But, the FBAR is on automatic extension through October.

Form 8938 for Inherited Offshore Accounts & Overseas Assets

The Form 8938 was developed in accordance with FATCA. The 8938 was first introduced on the 2011 (1040) tax return. Since then, the form has been revised and updated – but it is essentially the same. It requires the reporting of foreign financial assets to the IRS, along with the income generated from the assets. Unlike other international information reporting returns, the Form 8938 is due to be filed at the same time a U.S. taxpayer’s Tax Return is due. Therefore, for most (U.S. Resident) taxpayers, the form will be included as part of the 1040 submission in either April or October. It is one of the few international tax forms included as part of TurboTax and Tax Act software.

Schedule B for Inherited Offshore Accounts & Overseas Assets

The Schedule B is used to report dividends and interest. BUT, the bottom section, part 7 and 8 are also used to report whether a person has an ownership in or signatory authority over a foreign account. If so, the individual must complete that section of Schedule B. The Schedule B does not have any offshore penalties associated with it, but it may lead to FBAR and/or Form 8938 Penalties.

Other International Reporting Forms

Form 3520

Form 3520 is filed when a person receives a Gift, Inheritance or Trust Distribution from a foreign person, business or trust. There are three (3) main different thresholds:

  • Gift from a Foreign Person: More than $100,000.
  • Gift from a Foreign Business: More than $16,076.
  • Foreign Trust: Various threshold requirements involving foreign Trusts

Form 5471

Form 5471 is filed in any year that you have ownership interest in a foreign corporation, and meet one of the threshold requirements for filling (Categories 1-5). These are general thresholds:

  • Category 1: U.S. shareholders of specified foreign corporations (SFCs) subject to the provisions of section 965.
  • Category 2: Officer or Director of a foreign corporation, with a U.S. Shareholder of at least 10% ownership.
  • Category 3: A person acquires stock (or additional stock) that bumps them up to 10% Shareholder.
  • Category 4: Control of a foreign corporation for at least 30 days during the accounting period.
  • Category 5: 10% ownership of a Controlled Foreign Corporation (CFC).

Form 8621

Form 8621 requires a complex analysis, beyond the scope of this article. It is required by any person with a PFIC (Passive Foreign Investment Company).

The analysis gets infinitely more complicated if a person has excess distributions. The failure to file the return may result in the statute of limitations remaining open indefinitely.

*There are some exceptions, exclusions, and limitations to filing.

We Specialize in Streamlined & Offshore Voluntary Disclosure

We specialize exclusively in international tax, and specifically IRS offshore disclosure.

We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.

Less than 1% of Tax Attorneys Nationwide Are Certified Specialists

Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.

Recent Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Streamlined Counsel?

How to Hire Experienced Streamlined Counsel?

How to Hire Experienced Offshore Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • Board Certified Tax Law Specialist credential
  • Master’s of Tax Law (LL.M.)
  • Dually Licensed as an EA (Enrolled Agent) or CPA
  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience

Interested in Learning More about our Firm?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant.

We specialize in FBAR and FATCA. Contact our firm today for assistance with getting compliant.


Board-Certified Tax Law Specialist

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