TAX PROFESSIONAL COLLABORATION
Your client has international reporting requirements.
We collaborate with CPAs, tax attorneys, financial advisors, and accounting firms when a client’s situation requires international expertise.
Every engagement is scoped individually. All work product is prepared to your specifications and ready to incorporate into your client’s return.
~60%
Overall GAO error rate on tax returns prepared by practitioners.
71%
of individual IRC § 6038 penalties are assessed against taxpayers reporting under $400,000 in income.
$10K to $25K
Automatic penalty per form for taxpayers with late or missing international returns.
OUR SERVICES
What we handle for professional partners
Most international tax issues are straightforward enough for a generalist. Some aren’t. When that's the case, we can act as technical support.
Passive foreign investment companies
PFIC reporting is one of the most technically demanding areas of international tax. The modeling of IRC § 1291(d)(2) Elections (Purging Elections), IRC § 1295 Election (QEF Election), and IRC § 1296 Election (Mark-to-Market) is something most generalist preparers encounter rarely, if at all.
Penalty: There is no specific standalone financial penalty, but if your client omits a required Form 8621, the statute of limitations for their entire tax return remains open.
Foreign-owned U.S. entity reporting
Foreign-owned U.S. entities must file Form 5472 alongside a pro-forma Form 1120 if they are 25% foreign-owned corporations or foreign-owned single-member disregarded LLCs with reportable transactions (loans, contributions, fees). Required even if the entity has no U.S. income.
Penalty: $25,000 baseline penalty for failure to file.
Foreign partnerships
U.S. persons and foreign entities must report foreign partnership activities using Form 8865, depending on their ownership level and whether the partnership earns U.S.-source or effectively connected income.
Form 8865 is required if your client falls into one of these categories:
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Category 1: Controlling >50% partner of a foreign partnership.
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Category 2: 10% or greater partner in a foreign partnership controlled by U.S. persons.
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Category 3: Contributed more than $100,000 in property or experienced other qualifying transfers to the foreign partnership during the tax year.
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Category 4: Had an acquisition, disposition, or change in proportional interest that crossed the 10% threshold.
Penalty: $10,000 initial penalty for failure to file. For failure to report property contributed to the foreign partnership, the penalty is 10% of the property's fair market value, up to $100,000.
U.S. controlled foreign corporations
The international reporting requirements of ownership in a foreign corporation has been continually expanding since 2016. It encompasses CFC tested income (formerly GILTI, NCTI under the OBBBA), Section 965 transition tax, and the Subpart F regime. The penalty for non-filing or substantial non-completion starts at $10,000 per form per year.
Form 5471 is required if your client falls into one of these categories:
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Category 1: Client had a section 965 transition tax event or owns stock at year end.
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Category 2: Client is an officer or director of a foreign corporation when a U.S. person acquires 10% or more.
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Category 3: Client acquires, disposes of, or crosses thresholds of 10% or more ownership in a foreign corporation, or whose residency status changes.
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Category 4: Client controls a foreign corporation by owning more than 50% of the total voting power or value.
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Category 5: Client holds shares in a CFC during any day of the tax year.
Penalty: $10,000 initial penalty for failure to file.
Foreign trusts and estates
U.S. persons who interact with or own foreign trusts and estates face strict, complex annual IRS information reporting rules and heavy non-compliance penalties.
Form 3520: Reports transactions with foreign trusts, trust ownership, and large foreign gifts/bequests.
Form 3520-A: Annual information return for a foreign trust with a U.S. owner (grantor trust).
Common examples of foreign trusts include foreign pension plans, such as Australia superannuations and New Zealand KiwiSaver. Rev. Proc. 2020-17 does not always provide an exemption for these plans.
Penalties:
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Foreign Gifts or Bequests: 5% of the gross value of the gift for each month the form is late, up to a 25% max.
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Foreign Trust Transactions (Transfers or Distributions): The greater of $10,000 or 35% of the gross value of the property transferred, received, or distributed.
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Failure to Report Trust Ownership: 5% of the gross value of the portion of the trust assets treated as owned by a U.S. person.
The people handling your clients' returns have seen everything.
We work with firms of all sizes - from solo practitioners who occasionally encounter an international tax issue to larger firms with ongoing needs. Our team is available for direct collaboration with your client or exclusively through your firm, depending on what the engagement requires.
Every professional engaged by Crossbridge Tax holds a CPA license or bar admission, comes from a Big 4 or equivalent firm, and carries 10+ years of international tax experience. We hold this standard because your situation demands it.