Today TaxMama hears from B in Washington State, with this question. “If I have passive rental income of $100,000 from a business in Mexico that goes into a trust in Belize, am I required to report that on my 1040 in the US? I am a US citizen and live in the US 100% of the time.”
Yup! As an American, you are required to report your world-wide income. IRS has some delightful penalties they enjoy imposing on unreported income.
IRS doesn’t really recognize those ‘trusts’ as real entities. To IRS, the trust is just you.
These offshore ‘schemes’ (as IRS calls them) are expensive to set up. The real money is made by the promoters.
In fact, you should probably be reporting the bank accounts using Form TD F 90-22.1.
Failure to disclose your offshore bank balances of $10,000 or more could just generate penalties of up to $500,000. Not a nice thing to happen, is it?
On the other hand, you’re probably paying taxes in Mexico. When you report the income in the US, the Mexican taxes you paid might just offset any U.S. taxes you would have to pay. You’ll probably break even, or come close to it. So, you can go straight – and not spend much in the process. Be careful.
And remember, you can find answers to all kinds of questions about hiding income offshore and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Articles :: Income from Abroad is Taxable
- Form TD F 90-22.1. :: Report of Foreign Bank and Financial Accounts
- IRS Release :: IRS Reminds Taxpayers to Report Certain Foreign Bank and Financial Accounts by June 30