All U.S. citizens and some foreign persons are required to file income
taxes each year. This includes citizens and residents of the U.S., domestic
partnerships, domestic corporations, any estate other than a foreign estate,
and certain trusts.
The IRS Code contains the stipulations for when an individual or entity
is required to file a U.S. federal income tax return, which for most U.S.
persons is Form 1040. Foreign persons are usually obligated to file Form
1040NR each year to report their fixed determinable and periodic income
from U.S. sources and income tied to a U.S. trade or business for the year.
A foreign nongrantor trust is considered a foreign individual and will
need to file Form 1040NR each year to report its U.S. income. Foreign
grantor trusts must report certain information from certain U.S. nexus
and any U.S. person who keeps certain connections with foreign trusts
during the year such as ownership of a foreign grantor trust, transfer
of property to a foreign trust, and receipt of property from a foreign trust.
The person preparing the income tax return has varying requirements that
depend on the residence and classification of the trust. Preparers should
consult with an attorney for advice before the residence and classification