In recent years, the U.S. government has been very focused on disclosure of foreign assets on U.S. resident tax returns.
These disclosure rules apply to complex assets such as a stake in a family business located outside the U.S. as well as to basic financial accounts outside the U.S.
The following is an example of the questions asked on a U.S. tax return:
Failure to address these very basic “yes” or “no” type questions properly can result in a number of penalties that can exceed 50% of the account balance.
Criminal sanctions may also apply.
Examples of other financial assets that require IRS disclosure include:
- Foreign bank and brokerage accounts
- Foreign pension plans
- Minority and controlling stakes in non-U.S. businesses
- Foreign usufruct interests
- Foreign rental agreements
- Certain types of foreign contracts
The amount of information that must be disclosed depends on the type of asset as well as the percentage of ownership. Bottom line? File your disclosures!