Do I have to pay taxes on foreign inheritance to the IRS?
No, the IRS does not impose taxes on foreign inheritance or gifts if the recipient is a U.S. citizen or resident alien. However, you may need to pay taxes on your inheritance depending on your state’s tax laws.
Do I need to report foreign inheritance or gifts?
If you receive an inheritance from a foreign estate or non-resident alien, or gifts from non-resident aliens exceeding $100,000 (USD), then it must be reported to the IRS. This includes the total of all foreign inheritance or gifts received.
Those who receive inheritance or gifts from a foreign corporation or partnership must also report it if it exceeds $16,388 (for the year 2020). Keep in mind the threshold amount for foreign corporations or partnerships is adjusted annually for inflation.
What forms do I have to fill out?
U.S. taxpayers who receive inheritance or gifts exceeding $100,000 (USD) must fill out Form 3520. Form 3520’s purpose is to be an informational return that is included with your personal income tax returns. Failure to fill out Form 3520 could result in a 35% penalty on your foreign inheritance or gift.
If you decide to put your foreign inheritance or gift in a foreign bank account, you likely need to file an FBAR.
If you have more questions about foreign inheritance or need guidance with other international tax matters, call 410-671-0741 to schedule a confidential consultation with a Frost Law international tax attorney.
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