Inheritances and Money Offshore

by in Tax Issues

Did I ever tell you the one about…the hotel in the Bahamas that had a big sign in the lobby “Move Your Money To the Bahamas and Avoid US Taxes” ? It had an arrow pointing to a nearby meeting room and a time. So, two guys, decided to follow the arrow and attend the sales pitch. They nodded to each other from time-to-time, impressed with the presentation.

At the end, when the heavy-duty solicitation began, the salesmen convinced people to get up and say why they are there and why they are going to sign up. After three other people got up, the pitchman pointed to one of the two guys.

Steve got up, and said, “Hi, my friend and I are here because we were curious about how this program worked. We’re IRS District Directors; and we’re in town for a conference of world-wide tax collectors.” The room emptied out.

True story – told to me by the (then) Los Angeles District Director.

Why do I bring this up?

Because if you have $10,000 or more worth of money (or money-like assets) in accounts outside the United States you must report these assets to the IRS and/or the United States Treasury. When you receive an inheritance of $100,000 or more, you must also file a report.

There is no fee for these reports. No taxes need to be paid. That’s the good news.

The bad news? It’s VERY, VERY bad. There are HUGE penalties associated with not filing the reports – or filing them late. The penalties start at $10,000 and $25,000 and rise to 50% – 100% of the contents of those accounts.

Even worse. Suppose the money isn’t really yours. You’re just a signatory on the account for an elderly parent. Same difference – report the account.

What are the forms; when are they due; how do you file them – and at what dollar level?

This isn’t the most fun way to end the year. But…the last official task my office performed is to file a couple of late Forms 3520 – praying that we can get over $50,000 worth of penalties waived. It was one of the most depressing things we’ve ever done. And I don’t want this to happen to you, simply because you didn’t realize you need to file these forms.

Have a great, and untaxing new year!

hugs

Eva

Your TaxMama®

 

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About the Author - Eva Rosenberg

Eva Rosenberg, EA, founder of the popular tax advice site, TaxMama.com, is a nationally syndicated Dow Jones columnist at MarketWatch.com, an author and popular speaker and instructor. Please join the TaxMama family and get answers to your own tax questions.

 

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