No problemo V! I'm only trying to share what I've found so any clarification(s) and or verifications are appreciated. I've been agonizing over whether or not I need to do a TD F 90-22.1..... Seems that with specific respect to Trusts, the TD is for Financial type Trusts with Income associated with them so wouldn't have anything to do with the Fideicomiso. This Site has probably the best explanation on IRS filing requirements and Fideicomiso that I've found and believe me, I think that I've read close to everything on the Web by now, LOL. http://www.emeraldcoastinvest.com/Investment/OverseasInvesting.aspx
Hi, Mole. These things always get a little tricky when you get down to an actual taxpayer. As I understand the issues, no unreported/unpaid taxes=no problems, with the amnesty period given allowing those who have failed to timely file appropriate forms- but have, nevertheless, fully and timely paid all attendant tax obligations- a chance to correct the omission. (This can occur when the tax preparer does such things as include the income on the line, "other income", without attaching the forms required or further identifying the source of the income.) Again, as I understand it, the report of foreign bank accounts and the report of involvement in foreign trusts are two separate matters; with Treasury form TD 90-22.1 the appropriate one to report the existence of foreign bank accounts. This report is not filed with the tax return, and is filed at an entirely different address, and is due on June 30, each year. In it, each foreign bank account you had in the previous year is reported. On the other hand, full disclosure of participation in foreign trusts appears to be made on form 3520, and related forms, and is filed with the tax return, each year. Involvement in foreign corporations appears to be reported on form 5471, and related forms, and is also filed with the tax return, each year. Since people here tend to own property either in a trust, or in a corporation, you'd think one or the other attachments to the return would be required of each U.S. person who owns, here, each year. Since many people will derive income in the form of rentals from their properties a tax obligation could easily arise, which might be considered either income to the trust, and reportable on forms 3420, etc.; or, be income to the corporation holding the property, and reportable on forms 5471, etc., as I understand those forms. Schedule E, together with these others, may also be necessary to complete the return. (See a tax professional for how to properly report this income.) _______________ The annual reporting of foreign bank accounts is the process I'm most familiar with since I've had them, and reported them, each year, starting with 2003 (June 30, 2004 report). These reports are required even if the accounts produced no income (interest). _______________ This amnesty, for simply complying with reporting requirements, and providing attachments that should have been part of the tax return, is only for those who don't also have an issue with unreported income. There is another program, the voluntary disclosure program, which gives the taxpayer a chance to report previously unreported income without incurring the full load of penalties. It also gives them a way to avoid future criminal prosecution, but it is not, in my opinion, for "do-it-yourselfers", as the requirements you must meet are complex, and the filings required in that process simply have to be done properly, in the proper manner, or a bad situation will have been made worse. (You gave us a reference to the webpage at IRS with the full details, as I recall, where full details are available.)
The only thing that I would add to your detail is: While Form 3520 is due at the same time as the Federal Taxes, April 15 or with an extension, it and Form 3520-A which has an absolute due date of March 15 after the Trust's tax year ends, both must be sent to the IRS Service Center, PO Box 409101, Ogden, UT 84409 and not included with the Federal filing.
That's cool. I looked at 5471, and saw that it had a sequence number, and assumed that 3520 did, too! (and, therefore, would accompany the tax return). Good work, Mole! What do you think about the question of how to report rental income, where the property is held in trust, such as through a fideocomiso? Schedule E, or some other combination?
I'm really not the right one to ask as we haven't rented our place in Cancun and don't plan to unless it were to become necessary. With that said, from my readings, I would agree that for US filings Schedule E, Supplemental Income and Loss, would be the correct vehicle to report rental income no matter where it was generated. What would concern me more as a US citizen generating rental income from a property in Mexico is how to file the appropriate Mexican Income Tax Forms. http://www.emeraldcoastinvest.com/Investment/OverseasInvesting.aspx Yet another possible can of worms that I hope I never have to deal with....
After reading all the information on the IRS website, the question remained about the definition of a "financial account." IRS WEB SITE: Q.What is a financial account? A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit, or any other account maintained with a financial institution or other person engaged in the business of a financial institution. Individual bonds, notes, or stock certificates held by the filer are not a financial account nor is an unsecured loan to a foreign trade or business that is not a financial institution. I called the IRS today, got some special offshore department, and they assured me that our fideicomisos do not fit the description above. Therefore filing it is NOT NECESSARY!
Hmmm, I guess interpretation is the biggest part of the problemo.... From my readings and conversations with various representatives of the IRS, the financial aspect that is referenced above with respect to "financial accounts" has more to do with Schedule B line 7 and the need to file a TDF 90-22.1. A TDF 90-22.1 needs to be filed when one has actual interest bearing/money making accounts (as an example) in Foreign entities. These are two separate issues but both require individual attention. As it is now, and I'm not saying that I agree, but it is what it is, that any US citizen who has/holds property in a restricted zone in Mexico that is held in a Mexican bank under a Fideicomiso must file forms 3520 and 3520-A as previously indicated and must respond "YES" on Schedule B, line 8. There is no tax implication but the penalties for not providing the forms/info appear to be quite severe IMO and not worth tangling with for the amount of time it takes to fill out the forms and the cost of the postage. As far as I know, the filing of these forms, reverts to tax year 2003 which means that those years would need to be amended (1040X) to show the change on Schedule B line 8 from 'NO' to 'YES' and then filing the 3520 and 3520-A. The Amnesty date, which is really targeting those with real offshore type bank accounts totaling >$10K but also including Fideicomisos was extended from 9/23/09 until 10/15/09. I did a lot of research and spoke with a number of IRS folks. Based on my own findings and feelings (which were not warm and fuzzy as to who and what the IRS knew on the subject of Fideicomiso), I decided to lean on the side of caution and therefore amended our 2007 1040 (year we acquired our Casa) and filed 2008's (had an extension) and also sent 2007/08 forms 3520 and 3520-A. Sent the appropriate info to Ogden, UT and also to the Philadelphia Offshore Group per the response to FAQ #42. Maybe what I did was overkill but after speaking to a number of IRS representatives on these issues and getting the feeling that none of them had a clue as to what it all meant, I decided that I'd rather be safe than sorry. Guess this is another area where one must do what they think is right and the best for them. ETA: Hopefully clarification per V's suggestion below.
Very nicely put, Mole. And I think it is helpful to continue to call attention to the fact that reporting foreign bank accounts, and reporting foreign trusts , are two, separate requirements for annual filings. The only part that I have an issue with is the suggestion that foreign bank accounts must only be reported if they earn interest. The purpose of the reporting requirement for foreign bank accounts (TD 90-22.1) is to deter money laundering and tax evasion, among other things. It would be a simple matter to avoid the reporting requirement if you could do so merely by foregoing an interest bearing account. The rules do not create an exception for non-interest bearing accounts, as I read them.
