COMMONLY USED TAX FORMS

Form 114 – Foreign Bank and Account Report (FBAR) is an informational filing required if you have more than $10,000 (or equivalent) in financial accounts located outside of the United States or have signature authority over such accounts

The financial accounts that must be reported include bank and securities accounts and pension funds. The FBAR is filed to the Financial Crimes Enforcement Network (FinCEN), which is separate from the Internal Revenue Service (IRS), and, therefore a separate filing from your 1040.

If you fail to file your FBAR on time, you may be subject to penalties, which can range from $10,000 to $100,000 or more per bank account.

Form 8938 was introduced as part of the Foreign Account Tax Compliance Act (FATCA) and used to report certain non-U.S. financial assets to the IRS.

If you have non-U.S. financial assets (such as non-US bank accounts, ownership in non-U.S. entities, pension funds, and other foreign assets) that are worth over a certain threshold, you need to file Form 8938 with your tax return. The thresholds vary depending on where you live and whether you are filing a joint return with your spouse. The requirement to file Form 8938 is separate from the requirement to file Form 114 (FBAR), even though the same information may be included on both forms. If you do not file Form 8938 on time, you might face $10,000 or more penalties.

Form 5471 is used to report information about certain foreign (non-U.S.) corporations. If are a shareholder in a non-U.S. company, you may need to fill out this form. This filing is complex and varies depending on your specific situation. Failure to file this form can subject you to significant penalties.

Section 962 Election allows individual shareholders of CFCs (controlled foreign corporations) to be taxed as a domestic (US) corporation, thereby claiming a corporate foreign tax credit on certain items of income based on the non-US corporation’s foreign taxes paid. This election is made to reduce or eliminate the tax due on certain income inclusions from CFCs (reported on Form 5471), including GILTI and Subpart F. The calculations required are complex and require the filing of certain corporate tax forms and attaching them to your individual tax return.

Form 8865 is used to report transactions (such as forming, dissolving, acquiring or selling interest, receiving distributions from, and contributing to) with non-U.S. (foreign) partnerships.  The form includes information about the foreign partnership, as well as information about your interest and the transaction in the partnership. Form 8865 should be filed with your income tax return (1040) for the year in which the transaction occurred, and a separate Form 8865 should be filed for each foreign partnership. If you are required to file Form 8865 but fail to do so, you may be subject to penalties.

Form 8621 is used to report holdings or sales of shares in a passive foreign investment company (PFIC).

A PFIC is a foreign company that has mostly passive income or mostly assets that produce passive income. Examples of PFICs include foreign mutual funds, foreign ETFs, and MTFs. To determine whether a fund is foreign, we advise checking the ISIN; if it does not start with U.S., it is foreign.   In Israel specifically, Israeli Kranot Neemanut, Kranot Sal, and Kupot Gemel L’Hashkaa are also considered to be PFICs.  Calculating the tax owed on each sale of PFIC shares can be complicated. Therefore, specialized software is often used.

Form 8621 is included as part of your tax return and may even be required if you do not have to file a tax return otherwise. A separate Form 8621 is filed for each investment that had a sale during the tax year and must report all holdings annually if aggregate PFIC stock is more than $25,000 ($50,000 if married filing joint). The IRS imposes strict rules on PFICs, and as a result, you may owe additional taxes due upon the sale of PFIC investments.  We advise avoiding investing in PFICs going forward to avoid the onerous taxes and filing requirements.

Form 926 is an informational report that is filed when a U.S. entity (person, resident, corporation, estate, or trust) transfers certain types of property to non-U.S. corporations. It’s important to file Form 926 as penalties for failing to file and underestimating the value of the transfer range from 10% to 40% of the value of the property.

Form 3520 is used to report certain transactions involving foreign trusts and gifts/inheritances from foreign individuals. You may be required to file Form 3520 if you have received a gift or an inheritance from a foreign person valued at more than $100,000. You may also be required to file Form 3520 if you have created, transferred property to, or received a distribution from a foreign trust or if you are a U.S. person who is treated as a grantor or other owner of a foreign trust.

If you fail to file Form 3520 on time or correctly, you may face penalties which include the greater of $10,000 or a percentage of the value of the relevant property or distribution.

Form 3520-A is an informational return filed by foreign trusts that have 1 or more US owners. Form 3520-A includes details on the income and assets of the trust, as well as the income attributed to any US owners and beneficiaries.

Form 709 is used to report gifts that you gave during the year and to calculate any gift tax that may be due. Gift tax is only due if you have exceeded your lifetime gift exclusion, which is $12.06M in 2022.

You are required to file Form 709 If you are a US citizen/resident and:

You gifted more than $16,000 to someone other than your spouse
You gifted over $164,000 to your non-US citizen spouse

Form 8854 is required to be filed for the tax year in which you relinquish your U.S. citizenship or terminate long-term residency. This form is used to certify compliance with tax obligations in the five years prior to expatriation and satisfy reporting requirements as a recent expatriate. It includes details about your prior year’s tax liabilities, as well as the net worth on the date of expatriation, to determine whether you are subject to an exit tax (as a covered expatriate).

Form K-1 is used to report your share of income from the partnerships or S corporations you have invested in.

Starting with the 2021 tax year and going forward, the IRS requires Forms K-2 and K-3 to be included with any partnership/S Corporation tax return if there is any item of international tax relevance. Form K-2 discloses information at the entity level, whereas Form K-3 is for each partner’s share.

If you need a taxpayer identification number for U.S. tax purposes but are not eligible for an SSN, you’ll need to use Form W-7 to apply for an ITIN, or Individual Taxpayer Identification Number. Form W-7 is also used to renew expired ITINs (ITINs expire if they are not used at least once in 3 tax years).  To file Form W-7, you’ll need basic information, like your name, address, and date of birth, as well as documentation to prove your identity, like a passport. Form W7 is only paper filed to the IRS and must be accompanied by your tax return.

Form W-9 is used to provide the correct identification number (SSN, EIN, or TIN) to anyone required to report income to the IRS on your behalf. You might be asked to fill out Form W-9, the Request for Taxpayer Identification Number and Certification, for various employers, banks, or other institutions. For example, you’ll need to provide the form to an employer (in certain situations) you are a consultant for so that they can report your income to the IRS on a 1099 or to a bank so that they can report your mortgage interest to the IRS. To fill out the form, you’ll need your Social Security Number (or EIN/TIN), your name, and what type of entity (individual, trust, corporation, etc.) you are.

You’ll need to file a dual-status return if part of the year you are required to report U.S. and worldwide income, and part of the year, you are required to report only your US income.

For example:

• You were a U.S. resident alien (taxed on U.S. and worldwide income) and a nonresident alien (taxed on US income only) in the same tax year.
• You were a US citizen (taxed on US and worldwide income) and then expatriated and became a nonresident alien (taxed on U.S. income only) in the same tax year.

An alien is anyone who is not a U.S. citizen. A nonresident alien is an alien who does not have a green card or did not live in the U.S. for a period of time long enough to establish residence.

Form W-8 BEN-E is used by foreign entities to document their status as non-U.S. entities if they are earning U.S. income or have an account in a Foreign Financial Institution (FFI). This form is used to apply for a reduced rate of, or exemption from, withholding on U.S. income earned by the entity. The form should be filled out and returned to the person requesting it, typically before payments are made to the entity. If not provided, the withholding agent may have to withhold at higher rates.

If you’re a non-U.S. person earning US income, you may need to fill out Form W-8BEN. It’s used to confirm you’re a non-U.S. person and that the income belongs to you. It can also be used to claim a reduced or no withholding rate. You’ll need your name, country of citizenship, permanent address, and ID number (like SSN or TIN) to fill out the form. Return Form W-8BEN to the person who asked for it (not to the IRS).

Form SS4 is used to apply for an EIN, an employer identification number. An EIN is a 9-digit number assigned to employers (sole proprietors, corporations, partnerships, estates, trusts, and other entities) for tax purposes, such as filing tax returns, banking, or establishing new businesses or trusts.

Form 8832 is used for entities to elect to be classified and treated for tax purposes as a different type of entity than their default tax treatment.  This can be referred to as a “check the box” election.

Partnerships that have U.S. income (ECTI, Effectively Connected Income) and non-U.S. partners are obligated to file Form 8804 to calculate and report the amount of withholding withheld on behalf of the non-U.S. partners. Form 8804 is the basis for Form 8805, a form filed by the partnership for each non-U.S. partner and included by each non-U.S. partner on their personal return to claim excess withholding.