The requirements for reporting foreign gifts and foreign assets and trusts have been modified by the HIRE Act and the penalties for failure to file Form 3520 (the form for reporting foreign gifts and trusts) have been expanded and modified.
In general, a taxpayer is required to file Form 3520 if they are a U.S. person who received gifts greater $100,000 from a nonresident alien individual or a foreign estate, or if they received gifts of greater than $14,165 from a foreign corporation or partnership. A taxpayer is also required to file if they received a distribution from a foreign trust, if they are the owner of a foreign trust, or in other specified reportable circumstances.
The penalties can be severe. They usually amount to $10,000 or a percentage of the applicable assets (generally 35%) whichever is greater. It behooves taxpayers to consult with a tax professional to ensure they are in compliance with IRS regulations on this issue.
For more information on foreign gifts and for compliance and reporting of foreign trusts and assets, or for assistance with other tax law concerns, contact the Illinois tax attorneys at Horowitz & Weinstein.