With the sharp eyes of the IRS abroad and looming FATCA compliance, foreign bank accounts are less secret than they used to be. Income from abroad is taxable and you must report your foreign bank accounts.
If you have received a gift or inheritance from a loved one in a foreign country, the IRS wants to know about it. The recent Forbes article, “Beware IRS Reporting Of Foreign Gifts Too,” states that you will need to file an IRS Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if you receive:
More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; or
More than $14,375 from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts.
You are required to report these bequests on Form 3520 when you actually or constructively receive them. Late reporting penalties are high – five percent of the gift’s value for each month the gift is not reported, up to 25 percent of the total value.
One way to avoid penalties is to consult with your estate tax attorney for counsel on your individual circumstance. Remember that income from abroad is taxable, and the IRS is looking at foreign accounts ever more closely under the Foreign Account Tax Compliance Act (FATCA). To learn more, read the Forbes article, “How to Report Foreign Gifts and Bequests to IRS.”
Reference: Forbes (August 13, 2012) “Beware IRS Reporting Of Foreign Gifts Too”