2011 Tax Filing Season – International Information Forms

March 31, 2011

The 2011 tax filing season is in full swing and this is a good time to recall all of the international information returns that you may have to file or collect:

  • Forms W-8BEN, W-8ECI and W-9IMY — these forms are not filed with the IRS, but must be collected from the foreign payee if you are withholding tax at a rate of less than 30% due to a claim that the foreign payee is eligible for a reduced rate under an income tax treaty. You must have the appropriate form on file when the payment is made to be able to withhold at the reduced rate. The IRS can collect any under withheld tax from you as the withholding agent.
     
  • Form 90-22.1 (FBAR) — filed if the aggregate of reportable foreign financial accounts exceeds $10,000. This is a U.S. Treasury Department form which needs to be filed by June 30, 2010, with no extensions; it is not filed with the tax return. Anyone who is a signor or beneficial owner of a foreign bank or financial account(s) with more than $10,000 must disclose these accounts to the U.S. Treasury. The law imposes a civil penalty for not disclosing an offshore account as high as the highest of 50% of the balance in the account at the time of the violation or $100,000. Criminal penalties for willful failure to file an FBAR can also apply in certain situations. These penalties can be imposed for each year.
     
  • Form 926 — filed if you transfer property to a foreign corporation and if immediately after the transfer, you hold directly or indirectly 10% of the voting power or value of the foreign corporation.
     
  • Form 1042-S — filed if you make payments to foreign vendors or recipients of dividends, interest, rents, royalties, service fees, etc. to the extent that the payments are U.S. source income to the foreign recipient. Due no later than March 15, 2010, with a short 30-day extension available upon request, with copies sent to the income recipients and the IRS.
     
  • Form 3520 and 3520-A — filed if you are a grantor with respect to a foreign trust, or a beneficiary receiving distributions from a foreign trust or bequests or certain gifts from a foreign entity or decedent. This form is filed separately from the tax return.
     
  • Form 5471 — filed if a U.S. taxpayer (which includes individuals, partnerships, corporations, estates and trusts) owns 10% or more of the stock of a foreign corporation or are officers, directors or shareholders in Controlled Foreign Corporation. Due with the tax return (including extensions).
     
  • Form 5472 — filed by a “reporting corporation” that has “reportable transactions” with foreign or domestic related parties. A reporting corporation is either a U.S. corporation that is a 25% foreign-owned or a foreign corporation engaged in a trade or business within the United States. A corporation is 25% foreign-owned if it has at least one direct or indirect 25% foreign shareholder at any time during the tax year.
     
  • Form 8858 — filed if you have an interest in a foreign entity which is classified as a disregarded entity for U.S. tax purposes. Due with the tax return (including extensions).
     
  • Form 8865 — filed if you have a greater than 10% interest in a foreign entity which is classified as a partnership for U.S. tax purposes. Due with the tax return (including extensions).
     

The above is a short review of the basic filing requirements and is not intended to be tax advice specific to your situation.