There are two IRS penalties that we think are particularly troublesome for nonresidents moving to the US and trying to adapt to the US tax system which will tax their worldwide income and cause them to report their foreign assets and gifts sent to them from abroad.1. First, the penalty for failure to report a foreign gift or bequest. All U.S. taxpayer's have an obligation to report a Foreign gift, devise or bequest on Form 3520. There is no tax on receipt of the gift or inheritance, but the penalty for not filing a Form 3520 is 25%- 35% of the face value of the gift or inheritance. I have a case where the penalty the taxpayer is facing is close to $2 M.
2. The second example is failure to report foreign financial account by filing a Report of Foreign Financial Account (FinCEN Form 114). The "non-willful" penalty is $10,000 per account per year for up to six (6) years. The penalty for a "willful" failure to file an FBAR is the greater of $100,000 or 50% of the High Balance in the account. That same client who failed to file a Form 3520 may also face a 50% penalty for failing to file an FBAR. Willful has been interpreted to include the failure to report an offshore account on Scheudle B of Form1040.
There are other steps you should take in advance of moving to the USA including the sale of highly appreciated assets located abroad to avoid paying US tax on the gain from those sales. Also, your ownership of foreign corporations ,etc may necessitate a restructuring prior to your US move to avoid unfavorable US tax consequences. EMAIL US with you questions and for further assistance.
