Tax explainers for cross-border filers

The rules with the biggest gap between penalty and awareness

Foreign reporting is the area of US tax where the consequences of not knowing are most severe and the quality of freely available explanation is worst. FBAR and Form 8938 are separate requirements with different thresholds, different forms and different agencies, and it is entirely possible to owe one and not the other. A foreign mutual fund that looks like an ordinary investment is a PFIC with its own punitive regime. A gift from a parent overseas can require a form most preparers have never filed.

None of that is obscure to a practitioner. It is simply never explained to the people it applies to, most of whom are complying in good faith with rules nobody told them about.

What gets covered

Reporting: FBAR against Form 8938 and which one applies to you, PFIC rules and why a foreign mutual fund is a tax problem, Form 3520 and foreign gifts, and foreign rental property with its currency and depreciation complications.

Residency and filing status: the substantial presence test, filing with a nonresident spouse and the election that makes it possible, dual-status returns in a year of arrival or departure, and what a US citizen abroad actually has to file.

Coming into compliance: the streamlined filing procedures for people whose failure to report was not willful, and what they require. This is the one to watch if there are accounts that were never disclosed — the procedure closes off if the IRS makes contact first.

And ITINs — including how a Certifying Acceptance Agent verifies your passport in the office so it never goes in the post.

Who these are for

US citizens and residents with assets or income outside the country, nonresidents with US income, Indian nationals and NRIs with obligations in both systems, and anyone who needs an ITIN for a spouse or a dependent. This is the smallest of the three tracks by episode count and the most consequential by penalty exposure.