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Foreign Tax Reporting [NY Businesses Operating in Canada]

Norm Blatner Tax

Does your company operate internationally, including Canada, or do you have foreign holdings?

 

FATCA and FBAR compliance laws require U.S. citizens, resident aliens, and sometimes, nonresident aliens who have foreign holdings, to file the appropriate paperwork.

 

Foreign holdings can be a foreign bank account, foreign financial assets, or foreign financial interests.

 

International tax law can be a complicated subject. Many businesses and individuals may not be aware of the regulations or know if they are required to file. Here is some information and resources to help guide the process.

 

What is required to file?

FATCA is the Foreign Account Tax Compliance Act and requires: that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders. If you fall under these financial specifications, you may be required to file Form 114, a Report of Foreign Bank and Financial Accounts (FBAR), or possibly Form 8938, the Statement of Specified Foreign Financial Assets.

 

These requirements are under the Bank Secrecy Act.

 

All forms that may need to be filed:

  • Form 114: Report of Foreign Bank and Financial Accounts (FBAR)
  • Form 8938: Statement of Specified Foreign Financial Assets
  • Form 926: Return by a U.S. Transferor of Property to a Foreign Corporation
  • Form 3520: Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts
  • Form 3520-A: Annual Information Return of Foreign Trust with a U.S. Owner
  • Form 5471: Information Return of U.S. Persons with Respect to Certain Foreign Corporations
  • Form 5472: Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a US Trade or Business
  • Form 8621: Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund
  • Form 8865, Return of US Persons with Respect to Certain Foreign Partnerships
  • Form 8858, Information Return of US Persons with Respect to Foreign Disregarded Entities

 

How to know if you qualify?

Many business owners and taxpayers are simply not aware of these regulations. International tax laws, including Canada, can make tax compliance more complicated. It’s important to consult a tax professional who specializes in foreign tax requirements.

 

Here are a few questions to help determine if you may be required to file:

  • Does your business operate in Canada?
  • Do you or your business have holdings outside of the U.S.?
  • Do you have international bank accounts?
  • Do you have foreign owners, partners, or investors in your business?
  • Do you invest outside of the United States or through foreign investment organizations?

 

It’s possible that you’ve forgotten to file in the past, or may be unsure if your balances are above or below the reporting threshold.

 

Further, these requirements can be confusing if you or your business work with people or companies who:

  • Reside outside of the U.S. for 330 days or more
  • Have changes to past years international filing and reporting
  • Are green card holders

 

Mitigating Delinquency

Fortunately, the government and IRS have routes available for persons who may be required to file but have failed to in the past, to come forward and resolve their obligations. The IRS seems to be aware of the complexity of scenarios that can surround foreign reporting obligations.

 

The four routes available to mitigate delinquency are:

  1. Offshore Voluntary Disclosure Program (OVDP)
  2. Streamlined Filing Compliance Procedure (SFCP)
  3. Delinquent FBAR Submission Procedure
  4. Delinquent International Information Return Submission Procedure

 

Taxpayers who find themselves pursuing one of these paths should be careful to choose the most appropriate route for their situation. A submission to one procedure that is denied by the IRS may restrict the taxpayer from pursuing a second alternate option. It is highly recommended to consult a tax professional.

 

Blatner & Mineo CPA PC specializes in financial accounting and tax services for Western New York businesses, including those that have FBAR reporting requirements. We’ve helped many of our clients ensure they’re compliant to these tax regulations and have the proper forms filed on time.

Call us today and avoid any risks with your business if you have questions about foreign reporting obligations or tax requirements!