Children With Foreign Accounts: Unexpected Income and Reporting Obligations

A live 110-minute CPE webinar with interactive Q&A

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Tuesday, October 11, 2022

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

or call 1-800-926-7926

This webinar will highlight how children with negligible ties to the U.S. become subject to U.S. reporting requirements. Our panel of astute international tax experts will provide examples and explain income tax and foreign reporting obligations and how to remedy past noncompliance for tax professionals working with international taxpayers.

Description

Many scenarios can trigger unexpected U.S. filing obligations for children. Children can become U.S. citizens by being born on U.S. territory or outside the country to a U.S. citizen. Parents with well-meaning and generous intentions often establish accounts in other countries before obtaining citizenship or residency status in the U.S. These accounts can grow steadily, generating income above the annual filing requirements and balances above the thresholds for filing information returns.

Failure to file Form 8938, Statement of Specified Foreign Financial Assets, for example, prevents the statute of limitations from running on an income tax return leaving the IRS period to assess tax open indefinitely. Simply receiving certain gifts of money or property from a nonresident or foreign trust can trigger penalties of $10,000 or 35 percent of the amount distributed if not correctly reported on Forms 3520 or 3520-A.

In addition to information reporting, these accounts often generate passive income above the annual filing threshold. Parents could choose to report this income on Form 8814, Parents' Election to Report Child's Interest and Dividends, and include this on their return. Frequently, however, this is not an option, and the child must file their own individual income tax return and include Form 8615, Certain Children Who Have Unearned Income.

Regardless, children have a separate obligation to file the FBAR, Form 8938, and to answer the Foreign Accounts and Trusts inquiries on Schedule B. Tax practitioners and advisers working with international taxpayers with children need to thoroughly grasp the filing requirements of children subject to U.S. reporting obligations.

Listen as our panel of international tax advisers explains the often unanticipated filing obligations children have in the U.S. and the IRS programs available to rectify prior noncompliance.

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Outline

  1. Introduction
  2. Income tax filing obligations
    1. Form 1040, Schedule B
    2. Form 8814
    3. Form 8615
    4. Form 8938
  3. Gift reporting obligations
    1. Form 709
    2. Form 3520
  4. Other reporting requirements
    1. FBAR
    2. Form 8621
  5. Resolving noncompliance

Benefits

The panel will cover these and other critical issues:

  • Identifying taxpayers whose children may have filing obligations
  • Understanding methods available to correct prior years' noncompliance
  • Deciding when a child has a U.S. income tax filing obligation
  • Determining when receipt of a gift by a child could trigger a reporting requirement

Faculty

Dougherty, Alison
Alison N. Dougherty, CPA
Managing Member
Googolplex Tax Services

Ms. Dougherty provides U.S. tax reporting, compliance, consulting, planning, and structuring solutions to U.S. and...  |  Read More

Kennedy-C. Edward
C. Edward Kennedy, Jr., CPA, JD

Managing Director
C Edward Kennedy Jr

Mr. Kennedy has more than 36 years of experience dealing with a variety of international tax matters, specializing in...  |  Read More

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