IRS Assistance With Estate Taxes For International Filers

March 2, 2020

Failure to properly address U.S. tax issues and filing requirements when dealing with U.S. estate tax can have serious consequences. Understanding your obligations is key.

U.S. Estate Tax

Last fall, the Internal Revenue Service created a series of frequently asked questions on estate taxes for international tax filers. They addressed situations where descendants are non-residents and non-citizens of the U.S. at death but may have U.S. federal estate tax and filing obligations. A link to the IRS frequently asked questions page is below.

The IRS wants foreign taxpayers to better understand their obligations, including tax liability, annual or final tax filing obligations, and requirements to obtain a transfer certificate. 

Transfer Certificate Requirements

Banks and financial institutions often require executors of estates to provide transfer certificates from the IRS before releasing funds to the estate, even where no U.S. federal estate tax is due.

U.S. Tax Reporting Obligations

If you are an executor of an estate with a non-U.S. citizen who owns U.S. situs assets such as:

  • U.S. equities, 
  • U.S. real property, or 
  • U.S. businesses,

the estate may have U.S. federal reporting obligations to the IRS and may owe U.S. federal estate tax. Where the descendant was a Canadian resident, the Canada-U.S. Income Tax Convention may provide relief from the U.S. federal estate tax liability but won’t necessarily provide an exemption from filing U.S. federal tax returns or forms. 

Consequences of Failure to Report and File for Executors

Failure to properly address the U.S. tax issues and filing requirements can, at a minimum, delay the distribution of assets to beneficiaries but more seriously result in unexpected U.S. tax liabilities or penalties to the estate exposing executors themselves to potential liabilities.

We can assist here. If you are an executor dealing with U.S. situs assets and you have questions or concerns about your compliance obligations, or would like to confirm you are compliant, we invite you to contact us.

IRS FAQs on estate taxes for international tax filers

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