En esta noticia
- The IRS will seize, one by one, all bank accounts, vehicles, and properties they received as an inheritance in these cases: What is the first thing to do after receiving an inheritance?
- Bank accounts, vehicles, and properties abroad: Can the IRS also seize them if I do not declare them?
- The forms to file in each case: FATCA vs FBAR
The Internal Revenue Service (IRS) is the federal entity in charge of tax collection throughout the country. This is the service to which tax returns must be filed every year and which is responsible for taking action against those who do not comply with their tax obligations.
One of the things the IRS is allowed to do is intervene in family inheritances. Although this is not an automatic process, it is possible if a combination of factors occurs, such as failing to declare the assets received.
The IRS will seize, one by one, all bank accounts, vehicles, and properties they received as an inheritance in these cases: What is the first thing to do after receiving an inheritance?
First, the IRS recommends identifying the type of assets that were inherited and determining whether there are financial assets outside U.S. territory. Often, taxpayers may think that an inheritance has no tax obligations, but that is a mistake.
Although an inheritance is not taxed as federal income, it becomes part of the deceased person’s estate and must be detailed in the Final Return of the Deceased (Form 1040), which must be filed by the estate’s executor or the surviving spouse.
The following must be included:
- All income earned
- Salaries
- Retirements and pensions
- Bank interest
- Dividends
- Investment income
- Applicable deductions and tax credits
If this procedure is not carried out, the IRS can determine taxes owed, interest, and penalties on the inheritance, and demand payment before it is transferred to the beneficiaries of the will.
If the inheritance generates income, Form 1041 must also be filed. It applies to:
- Savings accounts that earn interest
- Stocks that pay dividends
- Bonds
- Investment funds
- Rented properties
- Certificates of deposit
Bank accounts, vehicles, and properties abroad: Can the IRS also seize them if I do not declare them?
The IRS may move forward with a seizure of these assets if they are not declared. In particular, what can cause problems is the existence of tax obligations tied to inherited assets and the taxpayer’s failure to comply with them.
Bank accounts
These types of assets are the ones that attract the most attention from the IRS. If a person inherits an account outside the United States and certain thresholds are exceeded, they may have to file forms such as the FBAR or FATCA Form 8938.
Failure to comply can lead to fines, and if there are unpaid tax debts, also to an IRS seizure.
Vehicles
By themselves, they do not usually create obligations. However, as part of the estate, if a valid tax debt is determined and the taxpayer does not pay it after being notified, it is one of the assets that can be subject to seizure.
Properties
These types of assets are not reported through FBAR, but they can create other tax obligations:
- If the property is rented, the income earned could be subject to taxes in the United States
- If it is sold, there could be capital gains that must be reported
- If it is part of certain financial structures or foreign trusts, additional reporting rules could apply
If the obligations are not met, the IRS may move forward with a seizure.
The forms to file in each case: FATCA vs FBAR
The type of form to file may vary depending on the situation. Although the two most common obligations are FATCA and FBAR are not the same.
FATCA (Form 8938)
Form 8938 is filed together with the federal tax return and is used to report certain financial assets held outside the United States.
Among the assets that may be affected are:
- Foreign bank accounts
- Foreign-issued stocks and bonds
- Ownership interests in foreign companies
- Trust interests
- Other international financial assets
FBAR (FinCEN Form 114)
The FBAR is a report separate from the tax return and is filed with the Financial Crimes Enforcement Network (FinCEN).
The filing requirement arises when the combined value of all foreign financial accounts exceeds $10,000 at any time during the year, even if only for one day.
This form must include information such as:
- The financial institution where the account is held.
- The country where it is opened.
- The account number.
- The highest balance reached during the year.
- The type of account or financial product.