What IRS form do I need for offshore investment returns?

Full question:

What IRS tax reporting form would I fill out if I received a return from a high yield off shore private investment where groups of private investors pool their money into a single short term investment and receive the promised returns? These are non regulated off shore type investments.

• Category: Taxes
• Date: 04/07/2025
• State: Texas

Answer:

If you are a U.S. citizen or resident alien, you must report all income, including from offshore investments. This applies even if you do not receive a Form W-2 or Form 1099.

In addition to reporting your worldwide income, you must disclose any foreign bank or investment accounts. Under the Bank Secrecy Act, you need to file a Form TD F 90-22.1, known as the Report of Foreign Bank and Financial Accounts (FBAR), if:

• You have a financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
• The total value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

For more details on foreign financial account reporting requirements, refer to News Release FS-2007-15 and Publication 4261.

Generally, the character and source of income remain unchanged, even if income is funneled through various entities. For example, if a foreign trust is not treated as a grantor trust, distributions of its income are taxable to U.S. beneficiaries when received. Distributions of trust corpus are not taxable. IRC § 652 (simple trusts) and IRC § 662 (complex trusts) state that distributions maintain the same character in the hands of beneficiaries as they had in the hands of the trustee. A capital gain from a U.S. partnership remains a capital gain for the partners and any subsequent recipients.

We cannot provide specific legal or tax advice, as this information is general in nature. The appropriate reporting will depend on the specifics of your investment.