Source: https://www.gtlaw.com/de/insights/2018/9/international-tax-survival-guide-countdown-to-common-reporting-obligations-for-global-individuals
Timestamp: 2019-04-24 10:54:49+00:00

Document:
Lucy S. Lee James M. Maynor, Jr.
The due date for filing 2017 U.S. federal income tax returns for individuals who have requested an extension is Oct. 15, 2018. With only one month left until the deadline, we have prepared a countdown of 10 common tax reporting obligations that may be relevant to global individuals with cross-border assets or activities.
As a result of these rules, foreign corporations with U.S. ownership are more likely to be classified as CFCs, and U.S. persons owning stock in such corporations are more likely to be classified as United States shareholders — likely causing a substantial increase in Form 5471 reporting obligations and deemed dividend inclusions under the subpart F rules.4 Therefore, U.S. persons should comprehensively analyze the application of the new rules to their existing ownership structures to determine if they have Form 5471 reporting obligations that did not exist prior to the Act.
Failure to file can result in an initial penalty of $10,000 for each form and suspension of the statute of limitations with respect to the individual’s entire tax return.
Failure to file can result in a penalty equal to 10% of the fair market value of the property transferred.
Form 8621 is also used to make “purging” elections to avoid the onerous tax consequences of PFIC ownership under the excess distribution regime.
The Department of the Treasury (Treasury) regulations governing Form 8621 filing, which were finalized in December 2016,9 contain a variety of complex special rules and exceptions beyond the general summary provided above. U.S. taxpayers should carefully analyze the application of this recent guidance to their existing PFIC interests to determine how their Form 8621 reporting obligations may be affected.
For U.S. persons owning interests in foreign pass-through entities, Form 8865 (for foreign partnerships) or Form 8858 (for foreign disregarded entities) filing obligations may be applicable.10 At a very high level, these filing requirements can be described as analogous to Form 5471 and Form 926 reporting with respect to foreign corporations. However, the Treasury regulations implementing these rules are complex and have been subject to recent amendments, so U.S. taxpayers would be well advised to review how the current rules apply to their existing ownership structures.
Failure to file Form 3520 can result in a penalty of 35 percent of the gross value of the property transferred to or received from the trust or 25 percent of the value of gift or bequest. Failure to file Form 3520-A can result in a penalty imposed on the grantor equal to 5 percent of the gross value of the portion of the trust’s assets treated as owned by the individual.
In general, each U.S. person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country exceeding $10,000 is required to report such relationship by filing an FBAR.14 The FBAR filing is made electronically on FinCEN Form 114.
FBAR filings for a calendar year used to be due on June 30 of the following year. However, 2015 legislation changed the FBAR filing deadline to April 15 to coincide with the due date for U.S. individual federal income tax returns. In addition, FinCEN has granted all filers failing to meet the April 15 due date an automatic extension to Oct. 15 of each year.15 FBAR filers for the 2017 calendar year therefore have an extension to Oct. 15, 2018, even if they did not request an extension.
A non-willful failure to file can result in a penalty of $10,000 for each account, while a willful failure to file can result in a penalty of the greater of $100,000 or 50 percent of the value of foreign accounts. There can also be criminal penalties.
U.S. persons who own interests in specified foreign financial assets are required to file Form 8938 if the value of such assets exceeds certain thresholds.16 For this purpose, “specified foreign financial assets” include: (i) financial accounts maintained by a foreign financial institution; (ii) other foreign financial assets held for investment if they are not held at a foreign financial institution including (A) stock or securities issued by a non-U.S. person, (B) any interest in a foreign entity, and (C) any financial instrument or contract that has a non-U.S. person issuer or counterparty; and (iii) certain other foreign financial assets, including interests in foreign pension or deferred compensation plans, foreign trusts or estates, and certain foreign life insurance policies. Although there are some exceptions for duplicative reporting (e.g., for assets reported on Form 5471), there currently is no exception for assets reported on an FBAR. Therefore, both an FBAR and Form 8938 must be filed (if required), even if they report the same assets. Failure to file can result in an initial penalty of $10,000.
Form 8843 is used by a nonresident to claim that she can exclude days of physical presence in the United States for purposes of the substantial presence test. For example, Form 8843 filing may be required in various circumstances by teachers, trainees, students, athletes, or individuals with a medical condition.20 Failure to file the form by an individual seeking exemption as a professional athlete or because of a medical condition or medical problem can result in the individual’s exempt status being denied.
Due to the complexities of the reporting obligations described above, taxpayers are urged to consult with their tax professionals before filing their returns.
1Unless otherwise noted, all section references herein are to the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
2 I.R.C. § 951(b). The revised definition applies to tax years of foreign corporations beginning after Dec. 31, 2017, and tax years of U.S. shareholders with or within which such tax years of foreign corporations end. See Pub. L. 115-97 § 14214(b).
3 I.R.C. § 958(b). These rules apply to the last tax year of foreign corporations beginning before Jan. 1, 2018, and each subsequent tax year of the foreign corporations, and tax years of U.S. shareholders in which or with which such tax years of foreign corporations end. See Pub. L. 115-97 § 14213(b).
4 The IRS has issued guidance announcing relief from Form 5471 filing for certain constructive owners of a CFC. See IRS Notice 2018-13, § 5.02. However, the relief is limited to situations in which no United States shareholder owns stock directly or indirectly in the CFC, so it will not be available to all U.S. persons affected by the new downward attribution rules.
5 I.R.C. § 6038B; Treas. Reg. §§ 1.6038B-1 and 1.6038B-1T.
6 Treas. Reg. § 1.6038B-1(b)(3).
7 Treas. Reg. § 1.1298-1(b)(1).
8 Treas. Reg. § 1.1298-1(b)(2).
9 See 81 Fed. Reg. 95459 (Dec. 28, 2016).
10 I.R.C. §§ 6038, 6038B, and 6046A.
12 I.R.C. § 6039F(a); IRS Notice 97-34, 1997-1 C.B. 422. A lower limitation ($15,797 for the 2017 tax year) applies for gifts received from foreign partnerships or foreign corporations. See Rev. Proc. 2016-55.
14 31 C.F.R. §§ 1010.350(a); 1010.306(c).
15 See FinCEN Statement, “FBAR Due Date Clarification” (Feb. 2, 2018).
16 The thresholds are: (i) for taxpayers living in the United States, $50,000 ($100,000 for married taxpayers filing a joint return) on the last day of the tax year or $75,000 ($150,000 for married taxpayers filing a joint return) at any time during the tax year; and (ii) for taxpayers living outside of the United States, $200,000 ($400,000 for married taxpayers filing a joint return) on the last day of the tax year or $300,000 ($600,000 for married taxpayers filing a joint return) at any time during the tax year.
17 Treas. Reg. § 301.7701(b)-7(b).
18 Treas. Reg. § 301.7701(b)-8(a)(1).
19 Treas. Reg. § 301.7701(b)-8(d), (e).
20 Treas. Reg. § 301.7701(b)-8(a)(2).

References: § 951
 § 14214
 § 958
 § 14213
 § 5
 § 6038
 § 1
 § 1
 § 1
 § 6039
 § 301
 § 301
 § 301
 § 301