The reporting duties for individual U.S. taxpayers and particularly the owners of PPLI or ONE Trust is a rather comfortable one, if one can ever describe reporting duties as such. But if you compare it to what other U.S. persons with offshore assets, the owner of a PPLI could be described as having more comfortable, if not more straight-forward, reporting duties. Depending on how they have their offshore investments set up, U.S. investors may be exposed to the filing of a myriad of reporting documents. That list is daunting and can include not only the FinCEN Form 114 and Form 8938, but also Form 3520, Form 3520A, Form 5471, Form 8858, Form 8865...or all of the above!!
Owners do not need to get confused with these different numbers. Both solutions, ONE Trust as well as the various forms of PPLI benefit from simplified reporting requirements that are manageable and won’t require spending hours of your accountant’s time, or the bill that comes with their time.
Financial interest (e.g., generally ownership or signatory rights) over a PPLI policy, being a variable annuity or a life policy which has a cash value, should report it only on the FinCEN From 114, commonly referred to as the “FBAR”, and on the Form 8938.
Both forms are quite straight-forward and even single-pagers if all your offshore exposure is limited to PPLI. For our clients, the information needed to complete both forms is made available through us.
The information required on both forms is reduced to the basic information on the contract, as well as the total highest value of the policy for the year. And so, once you have completed your first FBAR and form 8938, the following years become even easier as you would just need to obtain the updated value for the previous year.
Key to remember:
The FBAR is required to be filed each year by June 30th, online, and with respect to all “foreign financial accounts” that were maintained at any point during the previous calendar year. For example, you would fill out and submit an FBAR in 2015 with information on the PPLI for the calendar year 2014. Note that there are no extensions for the FBAR; the filing deadline is June 30th. We also need to stress the point that you must complete and submit your FBAR electronically.
The Form 8938 is due with your tax filling documents, generally on April 30th of each year.Threshold amounts:
For the FBAR, the reporting threshold is $10,000 at any time during the calendar year
For the Form 8938, $50,000 on the last day of the tax year or $75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad)
Further relevant resources:
We are providing here links to a number of items related to these two forms, as well as a sample of a completed FBAR for your ready convenience.
We do need to be very clear on the point that we are not US tax attorneys or accountants. We know a lot about the tax rules of a number of countries, including the US. We’ve built that knowledge over the years based on our endeavour to provide our clients with wealth management solutions and strategies that are in compliance with the tax rules of their respective country. Therefore, we may in fact know more about international tax laws, planning strategies and cross-border solutions than many local tax attorneys and accountants.
Nevertheless, when dealing with a tax code like the one in the US – it encompasses somewhere north of 60,000 pages!! – it is certainly difficult to be a one-hundred percent sure. Thus, the information we provide in this article and its links should not to be taken as legal or tax advice and we recommend that you ultimately check, in regards to your particular situation, with a U.S. lawyer or a tax expert.
How to complete the FBAR:
You can find guidelines on how to complete the form by clicking here.
FinCEN 114 and Form 8938, comparison table
FinCEN Form 114 – Link to the form, instructions and online portal
Form 8938 – Link to the form and instructions
FAQs Regarding FBAR electronic filing