Income Tax Return Reporting of Foreign Accounts
In addition to the FBAR reporting rules, U.S. Federal tax law requires U.S. taxpayers to properly report on their U.S. Federal income tax returns, and timely pay applicable income taxes on, any interest, dividends, gains or other income earned on their offshore bank and financial accounts, whether or not such foreign accounts are subject to FBAR reporting. In connection with that requirement, and as an adjunct to FBAR reporting, U.S. persons must specifically disclose annually on their U.S. Federal income tax returns, under penalty of perjury, whether they own or have other financial interests in, or have signature or other authority over, any foreign bank and other foreign financial accounts during the tax year in question. The requirement to disclose ownership of foreign financial accounts aggregating over $10,000 on income tax returns applies to individuals (Form 1040, Schedule B), corporations (Form 1120, Schedule N), partnerships (Form 1065, Schedule B) and trusts and estates (Form 1041, Schedule G).
Use of foreign financial accounts may also trigger or effect the need to file special IRS information returns reporting transactions with offshore trusts, foreign gifts, and transfers to certain foreign corporations and foreign partnerships.
