Last week, TaxNotes published an article titled IRS Urged to Make Trust Reporting Changes for Retirement Accounts that reported on the “deluge of commentators” asking for “more relief from the foreign trust reporting requirements outlined in recent regulations”. Yesterday, the IRS contacted TaxNotes to provide comments including a clarification of the requirements to meet the “tax-favored foreign retirement trust” exception. The article was revised to state, “that the value threshold [of $600,000] … operates on an individual level” even if the trust’s jurisdiction’s law does not satisfy the contribution thresholds.
Democrats Abroad is pleased that the IRS has clarified that “tax-favored foreign retirement trust” relief is provided on an individual level based on how the account is contributed to and used rather than based solely on the account limitations applied in foreign statutes and regulations. We encourage the IRS to state this clearly in the final regulations so that taxpayers and tax practitioners can receive the guidance and relief that is so desperately needed so that Americans abroad can save for retirement.
It has been widely believed that non-US pensions and savings accounts have been subject to foreign trust reporting based on the account limitations. The regulations issued are not clearly written, however, so have been subject to interpretation. This clarification allows Americans abroad to finally make informed decisions on what options are available to them for savings and retirement and the IRS reporting requirements that come with it.
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