Raj Maruvada presented on reporting requirements for US residents regarding foreign income, assets, transactions, gifts and inheritances. Key points discussed included: 1) US citizens, residents and those meeting the substantial presence test may need to report foreign source income, financial accounts over $10,000, ownership in foreign businesses over 10%, and gifts or inheritances from foreign entities. 2) Common forms used are the FBAR for foreign accounts, Form 8938 for specified foreign financial assets, Form 5471 for foreign business ownership, and Form 3520 for foreign gifts or inheritances. 3) Failure to properly report can result in penalties, but consulting a tax professional can help ensure all requirements are met.

1. Reporting of Foreign Income,
Assets and Transactions
by US Residents
Presented by
Raj Maruvada
Certified Public Accountant
1202 Laurel Oak Road, Suite 206
Voorhees NJ 08043
15/23/2014

2. Introduction
My name is Raj Maruvada
I am a senior citizen and proud of it!
I am a Certified Public Accountant and my office is located in Voorhees.
I have been providing Accounting, Tax, Audit and consultation services including
information returns and income tax returns relating to foreign financial assets and
transactions.
Raj Maruvada & Associates, P.C
1202 Laurel Oak Road, Suite 206
Voorhees NJ 08043
Website: www.cparaj.com
Phone: 856 346 7141
Fax: 856 309 3500
Email: raj@cparaj.com
25/23/2014

3. Scope of Discussion
• Foreign Source Income
• Foreign Assets
• Ownership in Foreign Entities
• Money and Property transfers
to and from Foreign countries
• Gifts received from foreign
entities
• Inherited property
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4. Scope of Discussion
Cont….
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5. Scope of Discussion
Cont….
If any of the above discussed situations
apply to you, an experienced tax
professional would be the right person
to contact. For a consultation fee, they
would help you file the necessary forms
and meet the filing requirements and
deadlines.
55/23/2014

6. Scope of Discussion
Cont….
 Reporting requirements vary based on
various factors
 Reporting is done using different forms
 There are deadlines for filing the required
forms
 There are penalties for not reporting
Tonight, we will focus on obtaining a general
understanding of the above
65/23/2014

7. Who should file?
 US Citizens
 Green-card holders
 Any others who meet substantial
presence test
 lived in US for more than six months (with
some exceptions)
 US Citizens and GC holders living
outside US
75/23/2014

8. Who should file?
Cont….
 Corporations
 Partnerships
 Trusts
 Estates
85/23/2014

9. Why do we have to report?
Because Government says we have to
report
Why does Government want us to report?
◦ To identify/prevent Tax avoidance
◦ Identify income generating assets and
monitor reporting of income from those
assets
◦ Ensure full compliance with Gift tax and
Estate tax laws
95/23/2014

10. What needs to be reported?
 Foreign source Income
o Everyone required to file income tax return in US
must report income from all sources within and
outside of the US.
o This is true whether or not you receive a form W2,
form 1099 or the foreign equivalent (Form 1042-S)
o General categories of income – interest income,
dividends, capital gains on property sold, rental
income etc
o Any income earned for providing services in foreign
country has to be reported as income
105/23/2014

11. What needs to be reported?
Cont…
o Share of income from corporations, partnerships
and other business entities needs to be reported
o Foreign source income is taxed in US according
to US tax laws, not foreign tax laws.
o Foreign source income is taxed at US tax rates.
o If tax is paid in foreign country on any income
earned in that country, credit can be taken on US
tax return at US tax rates.
115/23/2014

12. What needs to be reported?
Cont….
While taxes have to be paid on foreign
source income as described above, no
taxes will be due on
• reported assets
• transactions
• gifts received
• Inheritances
The requirement is only to report
125/23/2014

13. What needs to be reported?
Cont…
 Foreign Financial Assets
There are two levels of reporting
 FBAR – US residents who own or have
signature authority over financial assets in
foreign countries must report balances in
those accounts.
 Form 8938 – Report all financial assets to be
reported on FBAR, except accounts with
signature authority only plus, foreign pensions
and deferred compensation, foreign stocks
held personally and interests in foreign
partnerships, Trusts and Estates.
 Need not be filed if Income tax return is not
required to be filed 135/23/2014

14. What needs to be reported?
Cont…
For Form 8938 –
◦ Total of all highest balances on any day of the
year in checking, savings and deposit accounts
Plus
◦ Market value at the end of the year of mutual funds, stocks
and bonds
Plus
◦ Year-end balances in Pensions, interests in Foreign
partnerships, Estates and Trusts
Equal to or exceed $75,000 (single)/ $150,000
(MFJ) on any day during the year
Or
Equal to or exceed $50,000 (single)/ $100,000
(MFJ) at the end of the year
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15. What needs to be reported?
Cont…
For FBAR –
• Checking Accounts
• Savings Accounts
• All types of Deposit Accounts
• Mutual Funds
• Stocks held with financial institutions
• Any other type of account which has cash available for
use
Total of highest balances on any day of the
year in each of the financial accounts (except
mutual funds)
plus
Market value as of December 31st for Mutual
funds and stocks held in financial institutions
155/23/2014

16. What needs to be reported?
Cont…
Good News!
 If the total of all of the above balances
doesn’t exceed $10,000 during the
year, no reporting is required
- Income from those assets must still
be reported
165/23/2014

17. What needs to be reported?
Cont…
 Ownership of foreign business
interests – reported on Form 5471 &
Form 8865
oUS Residents who have at least 10% interest in
foreign businesses such as corporations,
partnerships and other business entities that
may have been organized differently, must
report such interest in appropriate forms
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18. What needs to be reported?
Cont…
 Gifts and Inheritances – Form 3520
oGifts received from foreign entities must
be reported
oInheritances must be reported.
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19. Discuss some of the forms in
more detail
 Comparison of Form 8938 and FBAR
 Form 5471 – Ownership in Foreign
Corps
 Form 8865 – Ownership in Foreign
Partnerships
 Form 3520 – Receipt of Foreign Gifts
and Inheritances
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20. Consequences of not
reporting
You all want to report. So, why worry
about consequences of not reporting?
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21. Consequences of not
reporting In general, those who knowingly commit crime will be punished as
criminals;
 Those who commit crime without knowing what they did is a crime
OR
 Did not know that they are required to do something and that not
doing that is a crime;
 They will be treated in a different way if they become compliant
with the law as soon as they become aware of requirements
So, consequences of not reporting are the same either way.
215/23/2014

22. Conclusion
 We discussed who has to report foreign
financial interests and it really is – Every
person or entity who resides in US and has
financial interests in foreign countries.
 We discussed what needs to be reported –
which is pretty much everything you own,
acquire and operate in foreign countries, all
financial transactions you have with foreign
entities
 We discussed how and where to report all the
above
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23. Conclusion
 We have also touched up on consequences of not
reporting by emphasizing that we don’t care about the
consequences because we are going to comply and file
all required forms and reports.
 What I wanted to accomplish tonight is, to make you all
aware that there may be reporting requirements for any
foreign financial interest you may have and you have
reporting requirements if you have such financial
interests.
 If you believe you MAY HAVE REPORTING
REQUIREMENTS, you may want to consult a tax
professional.
 Cost of consultation and cost of complying are minimal
compared to non compliance.
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