- 1 Is Foreign Retirement Reported on FBAR, Form 8938, 8621 & 3520-A?
- 2 Who is Considered a US Person for Foreign Retirement Reporting?
- 3 Treaties are Mainly for Tax, Not Reporting
- 4 International Reporting Form Requirements for Foreign Retirement
- 5 FBAR & Foreign Retirement Plans
- 6 Form 8938 (FATCA) & Foreign Retirement Plans
- 7 Form 8621 (PFIC) & Foreign Retirement Plans
- 8 Form 3520/3520A & Foreign Retirement Plans
- 9 Amnesty Program Summary
- 10 Foreign Retirement Reporting is Complex
- 11 Golding & Golding: International Tax Lawyers Worldwide
Is Foreign Retirement Reported on FBAR, Form 8938, 8621 & 3520-A?
When it comes to the US tax and reporting requirements for foreign income, accounts, assets, and investments — foreign retirement plans are some of the most complicated — and they are required to be disclosed on many different international information reporting forms. Four of the most common international reporting forms for reporting foreign retirement plans are the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114); Form 8938 (Foreign Account Tax Compliance Act); Form 8621 (Passive Foreign Investment Companies), and Form 3520/3520-A (Reporting Ownership or Distributions from Foreign Trusts). Most US Persons (a misnomer that also included Green Card Holders and Lawful Permanent Residents) do not think of their Singaporean CPF, Australian Superannuation, UK SIPP, or Hong Kong MPF as accounts or assets — which is what makes the reporting of foreign retirement plans so complex.
Who is Considered a US Person for Foreign Retirement Reporting?
A US Person is not limited to individuals; it can include entities as well. For purposes of individuals and the US tax system, it is (generally) limited to three categories of filers: US Citizens, Lawful Permanent Residents, and Foreign Nationals who meet the Substantial Presence Test.
Treaties are Mainly for Tax, Not Reporting
In general, all US Persons are required to report their foreign accounts, assets, and investments on various international reporting forms — and international tax treaty law is not used to eliminate this requirement unless the person takes the position they were a foreign person for the tax year. The Treaty may help on tax issues, such as what portion (if any) of the retirement is taxable — and whether the retirement laws for the particular pension are taxed, based on residence or source (varies per treaty).
International Reporting Form Requirements for Foreign Retirement
When it comes to reporting the foreign pension, there are four main forms to consider. While Form 8938 (FBAR and FATCA) is the most common, Form 8621, Form 3520, and Form 3520-A are less common and more complicated.
FBAR & Foreign Retirement Plans
When a US person has foreign bank and financial accounts that in total exceed more than $10,000 on any day of the year, FBAR (FinCEN Form 114) reporting is required. There are many different types of overseas accounts that would qualify to be included on the annual FBAR — and foreign retirement plans, in general, are reportable. This is different from the situation in which a US qualified retirement plan may have foreign accounts or assets associated with the plan, in which it typically does not require separate filing by the beneficiary/employee.
Form 8938 (FATCA) & Foreign Retirement Plans
Similar to the FBAR is the IRS Form 8938, which was developed in accordance with FATCA (Foreign Account Tax Compliance Act). Form 8938 is more comprehensive than the annual FBAR filing — but the general reporting requirements are the same (maximum value). Foreign pension plans are required to be disclosed on Form 8938 and in fact, there is a separate section for foreign pension plans and other assets.
Form 8621 (PFIC) & Foreign Retirement Plans
Form 8621 refers to PFIC (Passive Foreign Investment Companies) which for most US individuals who own PFIC, involves foreign mutual funds and other equity funds. It is not uncommon for foreign retirement plans to include various types of investment funds. Some may include foreign investments, while others may also include some of the more common US funds such as VTSAX and VOO. It is important that taxpayers consult with a board-certified tax law specialist to evaluate the specific type of retirement fund and determine whether there may be PFIC reporting. Reporting on Form 8621 will also be impacted by other ancillary tax issues, such as whether or not it is a treaty country and whether or not there are distributions out of the fund and/or out of the plan to the beneficiary/employee.
Form 3520/3520A & Foreign Retirement Plans
The most complicated of all the forms is usually Form 3520/3520-A. Form 3520 can be complicated, because (unlike the FBAR and Form 8938) if the taxpayer is considered the US owner of a foreign trust (technically the foreign retirement is a type of trust), then the taxpayer may have to complete a more complex balance sheet as well as delineate various types of income sources and categories for reporting purposes. This is further compounded by other more complicated tax/reporting issues such as the throwback tax rule (DNI vs UNI), if the person was not a US person when the trust was initiated and whether or not a treaty country is involved.
There are some exceptions to 3520:
Revenue Procedure 2014-55
When the taxpayer has ownership of a foreign Canadian Registered Retirement Savings Plan (RRSP) or Registered Retired Income Fund (RRIF), then this Revenue Procedure exempts reporting on Forms 3520 — although reporting is still required on other forms such as the FBAR and Form 8938.
Revenue Procedure 2020-17
In 2020, Revenue Procedure 2020-17 was unleashed with the goal of minimizing duplicative reporting (FBAR, 8938, 3520, etc.), which is common amongst US persons who have foreign deferred retirement plans and other tax-deferred non-retirement investments. Unfortunately, there are several different factors to consider when determining whether or not Form 3520 will apply — and when applying those Rev. Proc. 2020-17 factors to specific retirement plans such as SIPPs and Supers, there is not usually a clear answer as to whether the Revenue Procedure will exempt reporting. It is important to also keep in mind that even if the foreign retirement plan is exempt for 3520/3520-A reporting under Revenue Procedure 2020-17, FBAR and FATCA are still required to be filed.
Amnesty Program Summary
The FBAR Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting.
Some of the more common programs include:
Foreign Retirement Reporting is Complex
When US persons have foreign retirement plans, it is important that they work with a specialist to properly and carefully evaluate the underlying investments of the retirement plan to determine what type of international information reporting may be required.
Golding & Golding: International Tax Lawyers Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.