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Enrolled Agent: Individual Exam 2020 > Citizenship Status and Foreign Income > Flashcards

Flashcards in Citizenship Status and Foreign Income Deck (30)
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1
Q

Foreign Income: What form do you file for income/ownership from a foreign trust or a large gift from a foreign person

A

Form 3520

2
Q

Foreign Income: What form do you use to report interest in a foreign partnership?

A

Form 8865

3
Q

Foreign Income: What is form 8938

A

Report foreign financial assets >$50,000 on the last day of the tax year OR
>$75,000 any day of the year
double for MFJ
* do not file if you don’t meet filing requirement

File with the IRS

4
Q

Foreign Income: What is GILTI and who is taxed? Form?

A

GILTI: TP share of Global Intangible low-tax income

TP owns 10% value OR voting rights in a controlled foreign corp (CFC).

form: 8992

5
Q

Foreign Income: What is FinCen 114 of FBAR?

A

Who: US citizen, resident or person doing business in the US
File with: Financial Crimes Enforcement Network 4/15
For: ownership interest or authority over a foreign financial account with an aggregate value > $10,000 any time during the year.
Civil and Criminal penalties if you don’t file.

6
Q

Foreign Income: What form do you use to report foreign financial account income > $10,000 anytime during the tax year

A

FinCen 114 or FBAR

7
Q

Foreign Income: What form is used to report income for directors/officers/shareholders of certain foreign corporations?

A

Form 5471

8
Q

What type of citizen statuses are their?

A
  1. US citizen
  2. US national
  3. US Resident Alien
  4. Non-Resident Alien
  5. Dual Status Alien
9
Q

What is a Non-Resident Alien?

A
  1. Not a US citizen

2. Does NOT pass either the green card test or the substantial presence test

10
Q

What is a green card?

A

A document issued by the US government that gives an immigrant the privilege of permanently residing in the US.

11
Q

What is the Green Card Test for Resident Alien?

A

TP has a green card that makes him a lawful permanent resident.

12
Q

What are the three statuses for Aliens to the US?

A
  1. US Resident Alien
  2. Non-Resident Alien
  3. Dual - Status Alien
13
Q

What is a US Resident-Alien?

A

Not a US citizen but passes either:

  • the Green Card Test OR
  • The Substantial Presence Test
  • Must file a tax return as if they are a US Citizen
14
Q

What is a Dual-Status Alien?

A

Resident Alien for part of the year and Non-Resident Alien for the rest of the year.

15
Q

When can Resident status of a Non-Resident Alien be revoked?

A
  1. when ever either spouse chooses (year of)
  2. death of either spouse - (If surviving spouse is a US citizen then QW/MFJ rules apply (year after revoked)
  3. divorce or legal separation (year of )
  4. Inadequate records (anytime the IRS decides)
16
Q

In what situations can a NR Alien file a US tax return?

A
  1. married to a US citizen or resident and elects to report all world wide income
  2. TP was a resident by the end of the tax year (Dual Status)
17
Q

When can a TP married to a NR Alien be claim the Head of Household filing status? How is EIC affected?

A

Requiremenst HH:
1. Spouse is a NR Alien at any time during the year
2. TP chooses not to treat spouse as a RA
3. TP meets the rest of the HH requirements
Spouses are considered unmarried for HH and married for EIC

18
Q

What should be included in a letter revoking a NR Aliens status as a RA?

A
  1. name, address, ssn or itin of each spouse
  2. name, address of person revoking for a dead spouse
  3. state, foreign countries, and property where community property laws apply
19
Q

Can a NR Alien get EIC?

A

NO. Exception: If NR Alien files MFJ and declares all worldwide income

20
Q

Is a NR Alien required to file a tax return? What is the tax rate?

A

Yes: If the person earns wages effectively connected to a US business (US income only)
Tax Rate: 30%

21
Q

How are scholarships, fellowships and grants taxed for NR Aliens?

A

If the funds where received for activities conducted outside the US the money is treated as foreign sourced income and not included on a US tax return

22
Q

What credits are disallowed for NR Aliens? (2)

A
  1. elderly
  2. education unless TP elects to be treated like a US resident
  3. EIC
23
Q

Can a NR Alien take the standard deduction or itemized deductions?

A
Standard Deduction: Yes
Itemized Deduction: Yes, if the deduction is connected to income from a US trade or business 
Some things that can be itemized: 
-state and local taxes
- charity to a US organization
-casualty and theft loss
24
Q

Substantial Presence Test:
How long does a Non-Resident Alien have to be in the United States to be considered a resident? If they are resident what would their immigration status be?

A
The Substantial Presence test would be used. 
At least :
2019: 31 days AND
183 days during 2019,2018,2017
Count all days in 2019
Count 1/3 days in 2018
Count 1/6 days in 2017

Immigration status would be Dual Status - part year Non-resident alien and part year Resident Alien

25
Q

Foreign Income: How are Form 8938 and FBAR different? (3)

A
  1. FBAR foreign financial acct >$10000
    8938 aggregate foreign financial assets >50,000 for year OR $75,000 any day during year
  2. FBAR filed: Financial Crimes Enforcement Network
    8939 filed: with TP’s regular IRS return
  3. FBAR: limited to bank and financial accounts
    8939: not limited to bank/financial accounts
26
Q

What qualifies as a CFC (Controlled Foreign Corporation)?

A

US shareholders own more than 50% of:

  1. all voting power of all classes of voting stock OR
  2. Total value of all the stock of the corporation
27
Q

What form is used to report transactions of US person with a foreign trust?

A

3520

28
Q

What form is used to report US taxpayers interest in a foreign partnership?

A

8865

29
Q

Who must file form 8865 (US taxpayer’s interest in a foreign trust)? (4)

A
  1. => 50% ownership
  2. => 10% ownership of US controlled PS
  3. Contributed property resulting in:
    * => 10% interest OR
    * > $100,000 FMV
  4. Has a reportable event (acquisition, disposition or change in % ownership)
30
Q

Foreign or Domestic Income: A NR-Alien student receives a scholarship/fellowship/grant from a US company/school for activities OUTSIDE the US?

A

Foreign Income and not taxable on a US tax return