Foreign Asset Reporting


Internal Revenue Service has concentrated efforts in recent years to ensure reporting of the existence of foreign holdings, and of income earned abroad or through foreign assets.

If you are a U.S. person (U.S. citizen, green card holder, or lawful permanent resident of the U.S.) or an entity established within the U.S., or which is owned by U.S. persons, or which conducs business within the United States, the following rules will apply.

Substantial penalties are assessed for failure to file any of the following applicable forms:

Statement of Specified Foreign Financial Assets (Form 8938):

If you meet certain filing thresholds of financial assets held outside of the United States,beginning with the 2011 tax year, you will be required to file a separate form 8938 for each account or financial asset.

This new form is required in addition to any filing requirements of Treasury form TDF 90.22.1, and requires substantially more information regarding account values, activity, amount of income earned and where reported, and ownership of the asset.

Report of Foreign Bank and Financial Accounts (Form TDF 90.22.1)

Form TDF 90.22.1 requires reporting of foreign bank and financial accounts, and includes such information as the maximum balance in each account each year.  Income from accounts is not reported on this form, but on schedule B of the 1040 tax return.


Information Return by a Shareholder of a Passive Foreign Inestment Company or Qualified Electing Fund (Form 8621):

A  separate form 8621 is required to report the existence of and transactions within foreign based mutual funds, pooled investments or partnerships.

The objective of this form is to include in income any realized and unrealized income earned within foreign based funds.  Further information is available here.


Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts (Form 3520/3520A)

Internal Revenue Service requires that form 3520 and 3520A be filed each year to disclose interests in foreign trusts held by U.S. persons.

For U.S. persons with connections to Canada, the following are considered foreign trusts:

a) Tax Free Savings Accounts (TFSA's); and
b) Registered Education Savings Plans (RESP's)

Therefore, for each such plan held by a U.S. person forms 3520 and 3520A must be filed. In order to do so, first we must apply for an Employer Identification Number for each foreign trust.

If we have identified that you have interests in either of the above types of accounts, we will prepare form SS-4 "Application for Employer Identification Number". This form must be completed and filed to obtain an EIN which is used to identify your trust. The application for an EIN is a one time occurence, and the same EIN can be then used each year when completing forms 3520 and 3520A.

In order to complete forms 3520 and 3520A, we will need the following information for each account. Please provide the following information for each TFSA or RESP account:

1) Name of Trustee bank;

2) Address of bank;

3) Account number;

4) Beneficiary of account (name);

5) Beneficiary (address);

6) Beneficiary U.S. social security number;

7) Date account established;

8) Contributions made to the account;

9) Current fair market value of account (at December 31);

10) Earnings within the account during the current year:
a) Interest
b) Dividends
c) Capital gains
d) Other income

11) Copy of the formation documents for each account, including copies of any subsequent amendments. These must be filed with the form 3520A.

Please note that all income earned in the year is taxable in the hands of the U.S. beneficiary.



Information Return of U.S. Persons With Respect to Certain Foreign Corporations (Form 5471):

If you own more than 10% of a foreign corporation, acquire or dispose of shares of a foreign corporation so that your holdings fall above or below 10%, or if the foreign corporation is considered a "Controlled Foreign Corporation", your proportion of certain types of earnings of the corporation are included in your personal income tax return.  This inclusion under supbart f of the Internal Revenue Code is made regardless of whether any income has actually been paid to you.

Further information regarding form 5471 is available here.