Tackling Cross Border Business Reporting and Tax Planning
When doing business or investing overseas consider these tax planning decision practices to avoid pitfalls
As a business owner sometimes your endeavors will take you overseas and/or across borders to foreign countries. Situations such as the aforementioned can be both exciting for your business as well as complicated when faced with the compliance and reporting requirements. For U.S. persons, which are defined as citizens, resident aliens, domestic legal entities, estate or trust, who either do business, live, or have investments outside of the U.S., it is important to understand the compliance requirements that are associated. New cross border business reporting requirements Recent legislation has tightened the reporting requirements for cross border/offshore investments, which have thus resulted in additional required information to be submitted with tax return filings. U.S. persons are required to report and be taxed on their worldwide income, therefore foreign income must be included on your U.S. income tax return. To better understand, there are two types of filing requirements of which are dependent on the types of investments and the value of the investments: Form 8938 – Statement of Specified Foreign Financial Assets:- This form is a required part of the annual tax return filing and is due by the tax return filling deadline, including the extension.
- Form 8938 is not required of individuals who do not have an income tax return filing requirement.
- If assets are $50,000 or greater on the last day of the year or in excess of $75,000 at any time during the tax year, the filing of this form is required.
- Failure to file penalties can be up to $10,000 for failure to disclose with an additional penalty up to $50,000 for continued failure to file after the IRS notification of non-disclosure.
- The Threshold for individuals living abroad is $200,000 in value as of the end of the year, or $300,000 at any time during the year.
- If at any point during the tax year, the value of the assets reaches $10,000, the filing of this filing is required.
- The maximum value of each account maintained at a financial institution must be reported.
- The filing deadline for this form is June 30th of the year following the tax year. Recently, this form can be electronically filed with the income tax return. If the income tax return is on extension, the FBAR must still be filed by the June 30th filing deadline.