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We purchased a condo which is in a corporation. We were told by both our realtor and our US tax preparer that we did not have to report it to the IRS.
After reading this forum, I am deeply concerned that our failure to report this will result in huge penalties.
Has anyone had experience with this? Any recommendations for good tax accountants who are familiar with these issues? Kind recommendations would be appreciated Thank you
[quote=”Margaritamomma”]We purchased a condo which is in a corporation. We were told by both our realtor and our US tax preparer that we did not have to report it to the IRS. After reading this forum, I am deeply concerned that our failure to report this will result in huge penalties. Has anyone had experience with this? Any recommendations for good tax accountants who are familiar with these issues? Kind recommendations would be appreciated Thank you[/quote]
If you own a foreign corporation you must report it to the IRS on form 5471, even if the corporation earns no income or is dormant. You can be fined $10,000 for not filing the form. I read about this requirement on this very forum in 2009. And if you go to the IRS website and type in “Form 5471”, you will get more information. I am by no means a tax expert, but when I learned about this, I asked our tax guy. He, in turn, contacted a friend who used to work for the IRS, who stated that yes, you must report owning a foreign corporation when you file your income taxes.
In fact, if you put “IRS Form 5471” in the Search section of this website, you will have 41 “hits”, and the article I am referring to is the very last one!
[quote=”Margaritamomma”]We purchased a condo which is in a corporation. We were told by both our realtor and our US tax preparer that we did not have to report it to the IRS. After reading this forum, I am deeply concerned that our failure to report this will result in huge penalties. Has anyone had experience with this? Any recommendations for good tax accountants who are familiar with these issues? Kind recommendations would be appreciated Thank you[/quote]
I think you will find that if you file IRS Form #5471 (reporting that you own or control a foreign corporation) and “possibly” FBAR form, FinCEN Report 114 (Report of Foreign Bank and Financial Accounts).
I say “possibly” on the second form because filing of the FBAR form is only mandatory if certain thresholds are met or exceeded.On the IRS website and link
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBARyou will find the following qualification statement:
[b]Who Must File an FBAR[/b]
United States persons are required to file an FBAR if:
1. the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.I would still check with a tax professional, but the information cited above is what I have learned and experienced so far – knock on wood!
Margaritamomma, just to make sure you understand, the FBAR requirement is separate from the 5471 requirement. FBAR is required when your foreign accounts exceed $10,000, as costaricabill stated.
Then there is also Form 8938, and you can find information on this requirement if you search “FATCA” on the IRS website. But both the FBAR and the FATCA requirements have to do with foreign financial accounts (such as bank accounts, if I am not mistaken) as opposed to corporations, which you asked about.
But you really need to talk to a tax advisor who knows about foreign accounts.
The person my husband and I have used for years was not familiar with these regulations until we brought it to his attention, which is why he contacted his friend who used to work for the IRS.
I was also made aware about Form 5471 when we attended the ARCR seminar, and a man who prepares U.S. tax returns in Costa Rica spoke about this requirement.
[quote=”Margaritamomma”]We were told by both our realtor and our US tax preparer that we did not have to report it to the IRS.
[/quote]1. A realtor has no business providing tax advice.
2. Sounds like you need to find a new U.S. tax preparer. Is your “tax Preparer” a solo or small practice or a large firm? Do you have any documentation (i.e. e-mail correspondence) that identifies what may be bad/inaccurate advice? If you do wind up being assessed penalties perhaps your “tax preparer” could be liable?
I agree with most everything that has been said so far. However, I would strongly suggest that you get in touch with a qualified International Tax Attorney as quickly as possible.
Only because there are some stiff fines and penalties that the IRS will impose on you( and they can go back in time as far as they want to) Keep in mind the IRS agents are on an incentive program and get paid huge bonuses for the tax revenue they are able to collect..
There are issues with you using your condo or letting others use it if it is in a rental pool. ie: you must declare revenue to the IRS at the published rental rate for yourself and friends using the condo.
You could say it is “Ghost Revenue” that the IRS expects you to pay taxes on.
This was the issue that tripped me up as well as having more than $10,000 in a Costa Rica bank.I too paid all the Taxes in Costa Rica and was told that it wasn’t necessary to file with the US IRS.
I can provide you with the name of the Attorney that saved me if you are interested. He is in Little Rock Arkansas and he too worked at the IRS at one time. You can contact me here (jlsret95)
hello – I have a property near Siquirres Limon CR that the waterboard of the area would like to buy because of the spring on it. I am concerned with the tax ramification in usa where I live & own a home & property — I’d like to get ready for this sale now — I appreciate your offer of the name of an Attorney in Little Rock Arkansas ! I started out w/a corp but last yr ended it as it seems there is no real need to have one if no $$ is passing thru it.
I am near Asheville, NC. when I mentioned this sale possibility to my tax man and hoped he could help me w/it — he said ‘why don’t you just not tell me about the sale?’
ooops–looking for another tax person !
thanks for any & all info !
Elizabeth Ure
Hi Elizabeth,
I live in Charlotte. Your post leaves me with more questions than answers.
What types of IRS forms you are (were) supposed to file depends on a number of things.
Was the corp an SA or SRL. Form 5471 or Form ?
What is/was the value of the property ? Possibly Form 8938
What is/was your filing status ? Are/were you a resident of CR or the US?
How is the property titled ? Was it titled in the name of corp that you have ended ? Possible Form 926.
There is [B]NOTHING[/B] that happens at the National Registry or through any Costa Rican Bank that the IRS does not have access to if there is a US citizen involved. And this info will likely be handed to them on a silver platter without request.
If you want advice from someone who is both a US international accountant and US tax attorney, you may want to check out http://www.taxmeless.com
It’ll cost you $300 for a telephonic or Skype consultation … but [B]ALL[/B] of your questions will be answered by someone competent to advise you in both disciplines.
But first, spend some time compiling all of your questions and all details of your financial dealings in CR.
Take care,
Bill
P.S Do’t be too hard on your accountant. This is a highly specialized area and I would speculate that only a small fraction of one percent of accountants know anything about it. The IRS code is over 30,000 pages and is constantly changing. How much can one person be reasonably expected to keep up with and still have time to make a living applying it?
Taking tax advice from a realtor is like asking your barber about the seriousness of your chest pains !
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