Some US citizens and Americans expats are exempt from reporting requirements for owning or transferring money to tax-favored foreign retirement trusts, the Internal Revenue Service has said.
Tax code Section 6048 generally requires US persons to annually report money or property transfers to, ownership of, or distributions from foreign trusts. Failure to comply can result in penalties.
The new procedures provide an opportunity to request abatement of penalties has imposed and a refund of penalties paid for tax years 2016 - 2018 or earlier years if paid in the last two years. A Form 843 should be used to file for this relief.
This revenue procedure provides an exemption from the information reporting requirements"
The IRS recognizes that many innocent taxpayers have faced the automatic and harsh application of penalties.
"This revenue procedure provides an exemption from the information reporting requirements under section 6048 of the Internal Revenue Code for certain US citizen and resident individuals with respect to their transactions with, and ownership of, certain tax-favored foreign retirement trusts and certain tax-favored foreign nonretirement savings trusts," Mary Beth Lougen, President of American Expat Tax Service said.
It applies only to trusts that are established and operated exclusively or almost exclusively to provide pension or retirement benefits, or to provide medical, disability, or educational benefits.
"For purposes of this revenue procedure, a tax-favored foreign non-retirement savings trust means a foreign trust for US tax purposes that is created, organized, or otherwise established under the laws of a foreign jurisdiction (the trust's jurisdiction) as a trust, plan, fund, scheme, or other arrangement (collectively, a trust) to operate exclusively or almost exclusively to provide, or to earn income for the provision of, medical, disability, or educational benefits, and that meets the following requirements established by the laws of the trust's jurisdiction," she added.
There are further restrictions in the guidance that apply as well. She recommends speaking to an experienced expat tax adviser to determine how the new regulations may apply to your specific situation.
Americans who have lived or worked in the UK or elsewhere overseas and own foreign trusts or those who have paid a penalty for late filed Form 3520 or 3520A for 2016,2017,2018 or paid an earlier year penalty within the last 2 years or have clients that did are eligible.