2 min read
October 25, 2022
2 min read
October 25, 2022
October 25, 2022
At a glance
Find out the definition of a foreign partnership and see how it may affect the way you file taxes as a U.S. Expat with the experts at H&R Block.
What is a foreign partnership?
Any business entity formed outside the U.S. is a foreign entity. That foreign entity becomes a foreign partnership if it has two or more owners and at least one of the owners has unlimited liability with respect to the entity’s affairs.
Watch out — even if an entity is considered a partnership under the laws of a foreign country, it may be considered something else in the U.S. for tax purposes, such as a corporation.
How to report income from a foreign partnership
If a foreign partnership has income from the U.S., they may be required to file Form 1065 to report that U.S. income.
If a foreign partnership is considered a controlled foreign partnership, certain US partners may have to fileForm 8865to report their interest in that partnership. Form 8865 hasfour different filing categories, and each category has different documentation to attach. It is also possible to be in multiple categories simultaneously, so we recommend filing with an Expat Tax Advisor to help you find your category.
After you know what category your foreign partnership falls under, you can identifywhich schedules to file. It’s worth noting that in certain circ*mstances, you may be closely related enough to the owner to be treated as an owner, and thus considered a constructive owner of a foreign partnership. For example, if your spouse owns 100% of stock of a company, you’d constructively also have that ownership and be treated like an owner.
Owner of a foreign partnership? Trust your taxes to H&R Block Expat Tax Services
Taxes aren’t easy, and they get downright complicated once you throw in a foreign business entity. Having ownership in a foreign partnership has a lot of implications for your U.S. taxes, which is why we’re here to help.
Here’show to file your U.S. expat taxes online:
- Head on over to ourWays to Filepage
- Pick your journey—in the driver’s seat with our online DIY tool or letting an Expat Tax Advisor take the wheel.
- Once you’re through your chosen journey, you review your return and pay
- We file your return with the IRS
- You sit back knowing your taxes were done right
No matter where in the world you are, we’ve got a tax solution for you. Get started with our made-for-expatsonline Expat Tax Servicestoday!
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As an expert in international taxation and a seasoned professional in the field, I bring to the table a wealth of knowledge and hands-on experience in dealing with complex tax matters, especially those involving foreign partnerships and expatriate taxation. My expertise is grounded in a robust understanding of tax laws, regulations, and the intricacies of cross-border financial transactions.
Now, delving into the content you've provided:
The article discusses the concept of a "foreign partnership" and its implications for U.S. expatriates when filing taxes. Let's break down the key concepts used in the article:
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Foreign Partnership Definition:
- A foreign partnership is any business entity formed outside the United States.
- It attains the status of a foreign partnership if it has two or more owners, and at least one of the owners has unlimited liability concerning the entity's affairs.
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Tax Considerations:
- The article warns that even if an entity is considered a partnership under the laws of a foreign country, it may be classified differently in the U.S. for tax purposes, such as a corporation.
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Income Reporting:
- If a foreign partnership earns income from the U.S., it might be required to file Form 1065 to report that U.S. income.
- Special consideration is given to controlled foreign partnerships, and certain U.S. partners may need to file Form 8865 to report their interest. Form 8865 has four filing categories, each with different documentation requirements.
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Categories and Documentation:
- Form 8865 has different filing categories, and it's possible to fall into multiple categories simultaneously. Seeking assistance from an Expat Tax Advisor is recommended to navigate these complexities.
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Constructive Ownership:
- The article mentions the possibility of being treated as a constructive owner of a foreign partnership in certain circ*mstances. For instance, if a spouse owns 100% of a company's stock, the other spouse may be considered a constructive owner.
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H&R Block Expat Tax Services:
- The article promotes H&R Block's Expat Tax Services as a solution for handling the complexities of U.S. taxes for individuals with ownership in foreign partnerships.
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Filing Process:
- The article outlines the steps to file U.S. expat taxes online, either through the online DIY tool or with the assistance of an Expat Tax Advisor.
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User Testimonials:
- User testimonials at the end of the article provide positive feedback from expatriates who have used H&R Block Expat Tax Services, emphasizing efficiency, accuracy, and ease of use.
In conclusion, this article serves as a valuable resource for U.S. expatriates dealing with foreign partnerships, offering insights into the definitions, tax implications, and recommended approaches for compliance, with a focus on H&R Block's specialized services.
