Foreign Trust Compliance - Taxation, Reporting, Forms 3520, FBAR & FATCA (Golding & Golding Tax Law)

Is Your Foreign Trust Out of US Tax or Reporting Compliance?

The international tax reporting obligations for foreign trusts are complicated. In general, the Internal Revenue Service does not like foreign trusts because it is not uncommon for a foreign trust to be used for improper purposes such as hiding income offshore or keeping foreign accounts secret -- and outside of the reach of the IRS.  When a US person has an ownership or interest in a foreign trust, they have to be careful to remain in compliance. That is because the penalties for failing to properly report information involving a foreign trust can be substantial. The two main forms taxpayers have to file with respect to a foreign trust are Form 3520 and Form 3520-A. But, these are not the only two international information reporting forms that a taxpayer may have to file to report aspects of their foreign trust. They may also have to file other forms such as the FBAR, Form 8938 (FATCA) -- and even Form 8621 (PFIC) if the foreign trust holds foreign trust funds such as mutual funds – or if the trust itself is deemed a PFIC. Let’s take a brief look at three of the key issues involving foreign trust reporting and tax compliance.

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