If you are a US person (meaning either a US citizen OR someone deemed a US resident for tax purposes), you are required to report all of your worldwide income on your US tax return each year.  This includes interest or dividends from non-US financial institutions, capital gains from the sale of foreign stock or real property, or income related to foreign pensions and retirement accounts.

Many people are unaware of these requirements, or it simply didn’t occur to them to check when filing their returns.  Some may have even received bad advice from a tax preparer telling them that they “didn’t need to worry” about reporting nominal foreign income.  However, all foreign income, no matter how small, must be included on your US tax return – even if you don’t owe a single dollar of US tax on that income.  

Whether or not you will have a US tax liability on this income is a complicated question.  There are several provisions in US tax law that help alleviate double taxation of income.  This includes tax treaties or totalization agreements between the US and foreign countries where the income was derived, as well as the Foreign Tax Credit or Foreign Earned Income Exclusion.

If you believe you have omitted foreign income from previous tax filings, you have far better options for resolving the issue if you self-correct rather than waiting for the IRS to find you.  Contact our firm today to discuss your Offshore Disclosure issues and how we can assist you.