Posted by BEST FINANCIAL GROUP LTD

An Understanding Of Your International Income Requirements.

An Understanding Of Your International Income Requirements.

The Internal Revenue Services, IRS has shown interest in U.S taxpayers who have accounts in Liechtenstein, Cayman and other countries around the world. According to the IRS, U.S citizens and residents must pay taxes on income received from foreign countries. It is, therefore, mandatory for U.S taxpayers to report all worldwide income on their yearly returns.

While most people fail to report these additional incomes, the IRS is adamant that all income sources, whether, a Form 1099, Information return or Form W-2 Wage and Tax Statement or foreign equivalent is received. Once you are a U.S citizen or a resident alien, you must adhere to the rules for filing gift tax, estate and income returns, whether you are currently in the United States or not.


What Will Happen if you Hide income in Offshore Accounts?

It may be considered a crime if you do not report income you receive from foreign sources. Currently, the IRS has teamed with international partners to find U.S citizens or residents who hide income in offshore accounts to avoid taxes. Specially trained IRS examiners use aggressive international tax planning methods to find taxpayers who abuse special structures and entities in foreign jurisdictions. The use of these aggressive methods were put into place to ensure residents and citizens alike, report all income and pay the right amount of tax.  


Overseas Financial Accounts

International banks and investment accounts must also be reported when you report your worldwide income. There is something known as the Bank Secrecy Act; this act was put into place to ensure that all citizens and residents file a report known as the Foreign Bank and Financial Accounts, FBAR; the FinCEN Form, which was previously known as the Form TD F 90-22.1. This form must be filed if you meet any of the below requirements:

·         The combined value of all international financial accounts if they are in excess of $10,000 within the current tax year.

·         If you have financial interests in, signature authority over one or more accounts internationally.


Consequences you Will Face if you Avoid Filing Your International Source of Income

If the IRS becomes aware of these “hidden” income sources, you face serious consequences for tax evasion. The penalties you may face include the payment of the additional taxes, plus interest and additional fines, you may even face some serious jail time.


Should you Report Promoters of Offshore Tax Avoidance?

The IRS encourages whistleblowing on promoters who provide U.S. residents and citizens with off-shore tax avoidance schemes. Individuals who report these promoters must file Form 211, Application for Award for Original Information in order for you to receive a reward from the IRS. To properly complete this form, you must follow the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under section 7623.


Getting a full understanding of the international income that you must report takes a little understanding and patience. If you receive worldwide income or have international bank and investment accounts, a BEST FINANCIAL GROUP LTD tax preparer will be able to provide you with valuable information as to what income and investments you must report to the IRS on your annual tax returns.


Whatever you do, don’t try to avoid paying these taxes because the IRS doesn’t take unreported income and assets lightly; therefore, to be on the safe side of the law, report all international income and assets.


If you are still confused and believe that you don’t need to report your international income, seek the professional advice of a BEST FINANCIAL GROUP LTD tax preparer.


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