Filing with IRS When Inheriting Property Overseas

Filing with IRS When Inheriting Property Overseas

Inheriting property is good news. The U.S. government does not tax the inheritance if the transferred asset is in a foreign land. However, the IRS penalizes failure to report such happenstance if it is valued at more than a defined threshold under various provisions.

Inheritance More Than $100k

The threshold is $100,000 for gifts from foreign individuals and $16,388 from corporations. A U.S. taxpayer should report such inheritance on IRS Form 3520. The due date coincides with the date of your income tax returns.

Foreign Tax Payment Certificate

Inheritors of an overseas property should fill and submit IRS Form 706-CE. The form certifies that any relevant tax has been paid on the foreign property. It can help the taxpayer take advantage of any tax credit and avoid double taxation.

The certification process, however, is usually long and drawn out due to various practical difficulties. The resident has to understand what taxes apply to the foreign property and if those taxes qualify for credit. The process might also include an English translation of the documents. An attorney can help you through this process.

FinCEN Form 114 or FBAR

Report to the U.S. treasury on FinCEN Form 114 if you bequeath more than $10,000 in the foreign account.

Cash Reporting & FinCEN 105

If you are coming to the U.S. with currency worth more than $10,000, report it on FinCEN Form 105 and submit it to the customs officer at any U.S. port of entry or exit.

Inform Bank of Transfer Above $10K

If you receive more than $10,000 from a foreign bank, inform your bank of the nature of the transaction to avoid the FBI’s money laundering inspection. All U.S. banks file FinCEN Form 104 for all transactions above $10,000 from foreign banks.

Office of Foreign Assets Control Restrictions

Finally, the U.S. Office of Foreign Assets Control imposes restrictions on specific countries. Be aware of such conditions. In case your inheritance is from any such country, approach a legal counsel for advice.

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