By Gina Gatchell, Director

IRS Announces Tax Relief for US persons with Certain Foreign Retirement and Non-Retirement Accounts

In refreshing news this week, the IRS has decided to exempt from burdensome information reporting requirements eligible foreign retirement accounts and eligible foreign non-retirement accounts.

In addition, automatic §6677[1] penalty relief is soon to be available on all open years for which penalties have been imposed for §6048 infractions.

Eligible individuals with certain tax-favoured foreign retirement trusts[2] and certain tax-favoured foreign non-retirement savings trusts[3] will be exempt from §6048[4] Information with Respect to Certain Foreign Trusts reporting requirements.

To be considered an ‘Eligible individual’ the following requirements need to be met:

  • An individual who is, or at any time was, a U.S. citizen or resident within the meaning of section 7701(a)(30)(A)),
  • who, for any period during which an amount of tax may be assessed under section 6501 is compliant or comes into compliance with all requirements for filing a U.S. Federal income tax return (or returns) covering the period such individual was a US citizen or resident,
  • to the extent required under US tax law, has reported as income any contributions to, earnings of, or distributions from, an applicable tax-favoured foreign trust on the applicable return (including on an amended return). U.S. individuals (U.S. citizens and U.S. residents),
  • who have met their U.S. income tax obligations with respect to the trust.

The exemption becomes effective from 16 March 2020 and applies retrospectively to all tax-favoured foreign trusts.

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[1] Failure to File Information for U.S. Owner of a Foreign Trust

[2] As defined in Revenue Procedure 2020-17

[3] As defined in Revenue Procedure 2020-17

[4] Internal Revenue Code §6048 Information in Respect of Foreign Trusts