The Curious Case of Precious Metals & IRS Offshore Requirements

The Curious Case of Precious Metals, FBAR & FATCA

Each year, US Taxpayers who have foreign investments, accounts, assets, and income are required to disclose this information on various different international information reporting forms to the IRS. Some of the more common types of international investments include overseas bank accounts, investment accounts, foreign pension plans, and foreign life insurance/assurance. With the current state of the US stock market — and the ever-changing globalized economy — there has been a recent surge of investments being made for items such as cryptocurrency and precious metals. The reporting requirements for these types of alternative assets can vary depending on how the asset is being held. One common question we receive is whether precious metals such as gold, silver, and palladium are required to be reported on various international information reporting forms. Let’s review the basics of precious metals for foreign account reporting such as FBAR and FATCA.

Direct Ownership of Precious Metals

According to the most recent information provided by the Internal Revenue Service — direct ownership of precious metals would not be reportable on an international information form such as FBAR and FATCA. For example, if you had a safe in your house and inside that safe you kept stored precious metals — it would not (generally) be reportable. If the Taxpayers own certificates representing ownership, then that could equate to ownership similar to owning corporation shares — which can be reportable.

Precious Metals Bank and Investment Accounts  

When it starts to get more complicated, is when taxpayers invest in precious metals through third-party investment companies and/or own certificates representing these types of investments, by way of investment accounts and funds. For example, if a Taxpayer has an investment account and in the investment account there are certificates representing ownership of various precious metals — then chances are that would be a reportable account. Likewise, if individuals have various investment accounts that contain the actual precious metals themselves, then that might be reportable as well because technically it is an account at a financial institution, and the account is specifically identified to the investor US person.

Precious Metals Investment Funds

More recently, Foreign Financial Institutions across the globe are offering investment fund opportunities to US investors that are traded on various exchanges in which the funds contain investments in various precious metals. Some of these companies are very proactive and provide taxpayers with information on how to report this as a PFIC (Passive Foreign Investment Company) – the main reason being when elections are made in the first year of having a PFIC, the tax implications benefit the US investor. Likewise, if these foreign investment companies are considering their own investments as PFICs — and reportable on form 8621 — then chances are it would also be a fund that is also reportable for FBAR purposes. It could also be reportable for FATCA purposes on Form 8938 but the IRS does not require taxpayers to duplicate the same asset on both form 8621 and form 8938.

For taxpayers who are out of compliance in prior years, they should consider reaching out to a Board-Certified Tax Attorney Specialist to get a clear understanding of the different amnesty options available to them.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax — and specifically FBAR penalties and IRS offshore disclosure & compliance.

Contact our firm for assistance.