The IRS & Offshore Tax Evasion: U.S. Foreign Grantor Trusts
By: Gary S. Wolfe, A Professional Law Corporation
U.S. Taxpayers who establish foreign trusts are subject to the US grantor trust rules which require them to pay tax on all trust income and declare all foreign bank accounts (over $10k, Fincen Form 114).
In addition, if the foreign trust owns foreign assets over $50k they must be declared on Form 8938 (FATCA filing) as part of their Form 1040 tax returns. A US taxpayer failure to declare the trust income, file Form 114 to declare the offshore foreign bank and financial accounts, or Form 8938 for foreign financial assets over $50k, subjects the US taxpayer to serious civil and criminal tax penalties and may suspend the statute of limitations on IRS tax audits.
The foreign trusts have additional tax filings including Form 3520 (on trust formation) and Form 3520-A (annual trust filings). Failure to file any of these trust tax returns suspends the IRS statute of limitations for tax audits and may subject the taxpayer to civil and criminal penalties.
About Gary S. Wolfe, Esq.
Gary Wolfe represents U.S. Taxpayers for IRS Tax Audits, U.S. Investors who have International Investments, and Foreign Persons who invest in the United States. We have over 30 years of experience specializing in IRS Tax Audits and International Tax Matters, including: International Tax Planning/Tax Compliance and International Asset Protection. For more information, please visit gswlaw.com.