Citizenship Status and Foreign Income Flashcards
Foreign Income: What form do you file for income/ownership from a foreign trust or a large gift from a foreign person
Form 3520
Foreign Income: What form do you use to report interest in a foreign partnership?
Form 8865
Foreign Income: What is form 8938
Report foreign financial assets >$50,000 on the last day of the tax year OR
>$75,000 any day of the year
double for MFJ
* do not file if you don’t meet filing requirement
File with the IRS
Foreign Income: What is GILTI and who is taxed? Form?
GILTI: TP share of Global Intangible low-tax income
TP owns 10% value OR voting rights in a controlled foreign corp (CFC).
form: 8992
Foreign Income: What is FinCen 114 of FBAR?
Who: US citizen, resident or person doing business in the US
File with: Financial Crimes Enforcement Network 4/15
For: ownership interest or authority over a foreign financial account with an aggregate value > $10,000 any time during the year.
Civil and Criminal penalties if you don’t file.
Foreign Income: What form do you use to report foreign financial account income > $10,000 anytime during the tax year
FinCen 114 or FBAR
Foreign Income: What form is used to report income for directors/officers/shareholders of certain foreign corporations?
Form 5471
What type of citizen statuses are their?
- US citizen
- US national
- US Resident Alien
- Non-Resident Alien
- Dual Status Alien
What is a Non-Resident Alien?
- Not a US citizen
2. Does NOT pass either the green card test or the substantial presence test
What is a green card?
A document issued by the US government that gives an immigrant the privilege of permanently residing in the US.
What is the Green Card Test for Resident Alien?
TP has a green card that makes him a lawful permanent resident.
What are the three statuses for Aliens to the US?
- US Resident Alien
- Non-Resident Alien
- Dual - Status Alien
What is a US Resident-Alien?
Not a US citizen but passes either:
- the Green Card Test OR
- The Substantial Presence Test
- Must file a tax return as if they are a US Citizen
What is a Dual-Status Alien?
Resident Alien for part of the year and Non-Resident Alien for the rest of the year.
When can Resident status of a Non-Resident Alien be revoked?
- when ever either spouse chooses (year of)
- death of either spouse - (If surviving spouse is a US citizen then QW/MFJ rules apply (year after revoked)
- divorce or legal separation (year of )
- Inadequate records (anytime the IRS decides)
In what situations can a NR Alien file a US tax return?
- married to a US citizen or resident and elects to report all world wide income
- TP was a resident by the end of the tax year (Dual Status)
When can a TP married to a NR Alien be claim the Head of Household filing status? How is EIC affected?
Requiremenst HH:
1. Spouse is a NR Alien at any time during the year
2. TP chooses not to treat spouse as a RA
3. TP meets the rest of the HH requirements
Spouses are considered unmarried for HH and married for EIC
What should be included in a letter revoking a NR Aliens status as a RA?
- name, address, ssn or itin of each spouse
- name, address of person revoking for a dead spouse
- state, foreign countries, and property where community property laws apply
Can a NR Alien get EIC?
NO. Exception: If NR Alien files MFJ and declares all worldwide income
Is a NR Alien required to file a tax return? What is the tax rate?
Yes: If the person earns wages effectively connected to a US business (US income only)
Tax Rate: 30%
How are scholarships, fellowships and grants taxed for NR Aliens?
If the funds where received for activities conducted outside the US the money is treated as foreign sourced income and not included on a US tax return
What credits are disallowed for NR Aliens? (2)
- elderly
- education unless TP elects to be treated like a US resident
- EIC
Can a NR Alien take the standard deduction or itemized deductions?
Standard Deduction: Yes Itemized Deduction: Yes, if the deduction is connected to income from a US trade or business Some things that can be itemized: -state and local taxes - charity to a US organization -casualty and theft loss
Substantial Presence Test:
How long does a Non-Resident Alien have to be in the United States to be considered a resident? If they are resident what would their immigration status be?
The Substantial Presence test would be used. At least : 2019: 31 days AND 183 days during 2019,2018,2017 Count all days in 2019 Count 1/3 days in 2018 Count 1/6 days in 2017
Immigration status would be Dual Status - part year Non-resident alien and part year Resident Alien
Foreign Income: How are Form 8938 and FBAR different? (3)
- FBAR foreign financial acct >$10000
8938 aggregate foreign financial assets >50,000 for year OR $75,000 any day during year - FBAR filed: Financial Crimes Enforcement Network
8939 filed: with TP’s regular IRS return - FBAR: limited to bank and financial accounts
8939: not limited to bank/financial accounts
What qualifies as a CFC (Controlled Foreign Corporation)?
US shareholders own more than 50% of:
- all voting power of all classes of voting stock OR
- Total value of all the stock of the corporation
What form is used to report transactions of US person with a foreign trust?
3520
What form is used to report US taxpayers interest in a foreign partnership?
8865
Who must file form 8865 (US taxpayer’s interest in a foreign trust)? (4)
- => 50% ownership
- => 10% ownership of US controlled PS
- Contributed property resulting in:
* => 10% interest OR
* > $100,000 FMV - Has a reportable event (acquisition, disposition or change in % ownership)
Foreign or Domestic Income: A NR-Alien student receives a scholarship/fellowship/grant from a US company/school for activities OUTSIDE the US?
Foreign Income and not taxable on a US tax return
