Yes, we do this daily. Tax returns for high-net-worth individuals are complex, especially if foreign financial income and assets are involved.
We find that the most commonly missed forms include:
- Form 114 (FBAR)— used to report foreign financial accounts when the taxpayer has a financial interest or signature authority.
- Form 8938— used to report foreign financial assets (e.g., foreign bank accounts, certain foreign pensions, ownership in certain entities, etc.) if the total value exceeds certain thresholds. Some international organization employee pensions must also be reported on this form, even if the employee is not currently taking distributions.
- Form 8621— used to report certain foreign mutual funds, pooled investments, and other passive investment companies.
- Form 3520— used to report a large inheritance or gift from a foreign person. It is also used to report ownership of, or distributions from, a foreign trust and certain foreign retirement accounts.
For new clients, we typically prefer to review the last one to three years of tax returns and FBARs (if filed) before we begin preparation of a current-year tax return. This review, in conjunction with the responses to our tax organizer questionnaire, gives us a good sense if there are any areas of “clean up” for the prior year filings. This review also helps us avoid repeating any past mistakes. Lastly, it helps us provide tax planning opportunities to our clients to help streamline their filings on a going-forward basis and potentially optimize their global tax position.
