U.S. Tax Reporting of Foreign Retirement Accounts and Other Foreign Trusts

Many Americans work and accumulate retirement accounts abroad. Many foreign nationals immigrate to the United States leaving retirement accounts behind in their country of origin. All of these individuals need to comply with the U.S. Internal Revenue Code and Bank Secrecy Act concerning their foreign retirement accounts and their other foreign trusts. The Internal Revenue Service is actively assessing substantial penalties for noncompliance.

The lack of clear guidance in the IRS' treatment of foreign pensions held by U.S. taxpayers has presented tax advisers with significant challenges in meeting compliance duties. Even the Government Accounting Office (GAO) issued a report in Jan. 2018, requesting the Service to provide more clarity on how taxpayers need to report interests in these accounts.

Most foreign retirement account plans are not considered "qualified plans" under IRC 401(a), which means the accounts generally do not qualify for tax-deferral treatment but are instead governed by Section 402(b) as a foreign trust. Depending on how the IRS applies 402(b) to a particular situation, employees holding foreign retirement accounts (and their beneficiaries) may receive harsher tax treatment than that of other non-tax-favored deferred compensation arrangements. This is particularly true in cases where the Service treats a foreign retirement account as a grantor trust.

Listen as our panel of experts discuss income taxation of a U.S. Persons’ Interests in foreign retirement accounts including identifying individuals and accounts subject to taxation.

1. Income taxation of U.S. persons’ interests in foreign retirement accounts
   1. U.S. persons subject to U.S. income taxation on their worldwide income
   2. Who is a “U.S. person”
   3. Contributions to foreign retirement account
   4. Earnings on foreign retirement account
   5. Grantor trust rules as applied to foreign retirement accounts
   6. IRC §83 as applied to foreign retirement accounts
   7. Foreign mutual funds (PFICs) held in foreign retirement accounts
   8. Tax treaties as applied to foreign retirement accounts
2. Information return reporting required for U.S. persons’ interests in foreign retirement accounts
3. Other issues
   1. BSA reporting for U.S. persons’ interests in foreign retirement accounts
   2. Voluntary disclosure programs
4. Case studies from practice

The panel will discuss these and other critical tactical issues:

• Grantor vs. employee trusts: understanding the IRS' test and the arguments against it
• The IRS' new 402(b) focus and when bifurcation is appropriate
• Foreign pensions of highly compensated employees
• Form 3520-A: when is it required along with 3520, FBAR, and 8938; penalty mitigation strategies
• What happens with PFICs inside a foreign pension
• How to use tax treaties
• Whether or not to use a disclosure program to clean up past misreporting

Learning Objectives

After completing this course, you will be able to:

• Determine steps to abate the $10,000 penalty
• Ascertain differences between foreign plans and U.S. qualified plans
• Identify different types of foreign plans
• Decide when to file Form 3520-A

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules for U.S. taxpayers owning or receiving payments from non-US retirement accounts; supervisory authority over other preparers/accountants. Specific knowledge and understanding of basic reporting requirements for U.S. taxpayers with foreign retirement account interests; familiarity with FBAR, FATCA and For 3520 filings

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).