The IRS Audit Blog

Posts Tagged ‘bank’

Question: How to file form 1098 for a foreign lender?

My lender is not a U.S. person (neither U.S. citizen or resident) and he receives my mortgage interest monthly, which is paid to his bank account in the U.S.A. He is supposed to file form 1098 and he has two questions: (1) As he doesn’t have Social security Number and Federal Identification Number, need he only put his foreign address and phone number? and (2) How to file this form with IRS —just download the form, fill it up, and mail it to IRS office?

Answer: Have *you* been withholding 30% of the interest payment and forwarding to the IRS as you were supposed to? Then at the year, you would issue the lender a 1042-S. These would be proof that you have paid the interest and that he paid his taxes on his US-source income. IRS pub 515.

As for filing the 1098, he files it if he’s in the trade or business of lending money. He files it with a W-7 application for the ITIN. He must order the form — it cannot be downloaded–and files it with a 1096. Note, he’ll also need to attach a note explaining why it’s late.

Thoughtless Taxation

This article appeared in the Washington Times on November 22, 2010. Treating variables as constants is a sign of a damaged brain. In the real world, almost any action taken by government is going to cause a behavioral response — and often one that is not intended.

Feb 17, 2010 – 13/16 – Dan Walkow

Question: Any attorneys out there? Tax lien situation whereby IRS has garnished wages to the point of poverty; remedies?

This info is for a freind whom has consulted w/ an atty. and stated that the only option is a settlement. This party does not have the money for a settlement nor enough assets to sell off to erase the tax liability. All wages garnished and personal asset(s) i.e. car has lien attached. Bankruptcy won’t work due to this is non-dischargeable debt. This person understands the need to pay and has a good job-salary, but the IRS has left her/him with $333 to live on ea. month. Bascially poverty-stricken. No doubt the gov’t has legal basis to due this, but, but, I believe it’s unfair/ unjust to propel a person into dire straits with collection efforts. If the garnishment was not at the present level e.g. leaving this person with say $1000 to live on monthly, it would be affordable. I don’t think the IRS… tax system, was setup to render a preson homeless or otherwise. Thank you for any assistance.

Answer: Obviously, I don’t know all the details, but the IRS will usually levy wages only after they have been ignored for a long time. Your friend needs to come up with a payment plan, either a proposed installment payment plan (form 433D, I think) or a partial pay offer in compromise (form 656), along with a financial statement on form 433A. The forms are on the IRS web site http://www.irs.gov. Good luck.

Erlanger provides biggest share of free care

Chattanooga’s two nonprofit hospitals each claim about 40 percent of the local market, yet one of them — Erlanger Health System — shouldered nearly 80 percent of the free hospital care provided to poor patients who aren’t expected to pay their bills last year, according to the most recent data reported to the state.

KJ Law Firm Introduction video

Question: Reporting of Foreign Bank and Financial Accounts (FBAR) for U.S. resident aliens?

According to the link http://www.irs.gov/pub/irs-pdf/f90221.pdf any United States person(including resident aliens which I am) who has a financial interest in or signature authority, or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year, must complete Treasury Department Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, and file it with the Department of the Treasury.

1. My funds in my home country’s banks are held in a joint savings account with my mother. Does that amount count toward calculating the 10K or not?

Answer: You have authority over those funds, so the full amount on deposit there is included and must be reported.

Several folks are misinterpreting the suspension of reporting. You are a resident so you must file the reports.

IRS 2010 Milestones

Here’s my own not very scientific list of ten highs and lows we taxpayers saw in 2010, mostly from t

IRS Offshore Account Amnesty: What if you don’t owe any tax?

Question: What are the reporting requirements on non-resident alien gifts?

My aunt (who meets the IRS definition of being a non-resident alien) intends to give $50k towards my son’s college education. My aunt lives in Switzerland. To ensure that the gift is given and received outside of the US (so as to make it non-taxable) I plan to open an account at a foreign bank into which I will receive the gift, and then wire to funds to the university. Gifts from non-resident aliens over $10k normally requires that the recipient file of IRS form 3250.

My Question: since this gift is being used for tuition, is it exempt from filing form 3250? IRC 6039F(b) (Notice of Large Gifts Received from Foreign Persons) has exepmtion language for tuition and medical expenses, but I find the language a bit vague.

Does someone know if, in the circumstances described above I am exempt from filing Form 3250? And thus, I can receive the gift tax free, spend it on tuition and file nothing with the IRS?

Thanks

Answer: I’m suspicious of the qualifications of the above “tax consultant” poster. I found the answer in the Form 3250 instructions on the IRS website, linked below, and it does NOT agree with what he states. I certainly won’t be paying HIM for any advice any time soon!

You don’t need to file the 3250 for a couple of reasons. One being the nature of the gift for tuition. The other is that the gift is coming from a foreign person where the reporting limit — at least as I’m reading it — is $100,000, not $12,760 (2006 rate, it’s adjusted for the cost of living.)

Even if the gift had to be reported, it still would not be taxed. The 3250 filing simply advises the IRS of the transfer so that they can evaluate the taxable status of the transfer. A bona-fide gift is never taxable to the recipient.

Technically the donor would need to file a US Gift Tax return and pay any tax due, however as the donor is not subject to US taxation they cannot be compelled to so do. There might be a tax treaty that addresses that issue but that’s a problem for the donor to contend with.

The US recipient of the gift is not taxed. Gift recipients are never taxed. It doesn’t matter what the money is used for.

There is no need to set up a foreign account for this gift to pass through. In fact, doing so will significantly complicate matters as you will now have to file additional informational returns since you have authority over a foreign depository account.

W.Va. to List Unclaimed Property

Six newspapers in West Virginia will carry lists this month of people entitled to shares in millions in unclaimed property held by the state treasurer.