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Jul 1, 2006 12:00 PM
Foreign Reporting: Get It Right
As estate planners, we love helping people, and as attorneys, we need to bill hours. So when we can help people and bill hours at the same time, you'd think that we would be elated. Not necessarily.
A large part of our practice in recent years has been devoted to fixing clients' foreign trust and entity tax reporting problems. It usually begins when a new client comes to us for what's ostensibly going to be a quick review of the foreign trust structure that some advisor set up for them. But what we often find is that even sophisticated lawyers have failed to realize that a trust will be considered foreign for tax purposes, which in turn leads to mishandled (or simply neglected) foreign tax and information reporting for the structure. Forensic accounting is needed to figure out what must be revealed to the government, and we have to beg the Internal Revenue Service for forgiveness and penalty abatement — which lately it is much less inclined to give. And be warned: Penalties and interest can be so severe that, after a relatively short period of noncompliance, they will outstrip the total value of the foreign structure (one client was faced with nearly $1 million in penalties as a result of only two years of missed reporting and another owed more in penalties and interest than the total value of the structure after only seven years of missed reporting.)
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
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