Should I have declared my stocks as foreign income in my US Tax Returns?

Question

I am a US citizen who has never lived inside the US. I was born in Belgium and lived there all my life.

This year I became aware of my obligations to declare taxes in the US. Because of this, I went through the IRS Streamlined Filing Compliance Procedure. I filed the last 3 years of 1040s and 6 years of FBARS. It seems like everything went through correctly and was accepted.

However, at the very end of 2018 I converted part of the stock options from the company I work for into actual stocks. A small part I cashed out. For this I had to fill in the W9 IRS form for my employer. I did not mention any of this (existence of the stocks, nor the W9 form) when filing my taxes.

Now I'm not sure if this was correct. Should I have mentioned that I own stock in the company I work for? Should I have mentioned the small amount of money I made off the stock options? If so, is there anything I can do now to resolve this?

Answer 1

Mark Johnson's answer is essentially correct. The income you're speaking of is not likely to be interest income, but the same principle applies: you can file an amended return.

To answer the questions posed in the body of the text:

Should I have mentioned that I own stock in the company I work for?

Since the tax is an income tax, you do not need to declare your assets directly. You do, however, have to declare any income derived from those assets. When you sell them or otherwise dispose of them, there will be capital gains that must be reported or losses that may be used to offset other gains.

Other income, such as dividends, must also be reported, of course.

Should I have mentioned the small amount of money I made off the stock options?

Yes.

If so, is there anything I can do now to resolve this?

Prepare and file an amended return.

I have never done that, so someone who has done so can probably offer a more helpful answer.

Answer 2

Disclaimer:
I have never had to deal with US Taxes.

For me, listening to such stories and general reading about this topic is like watching a vampire horror movie on television - knowing that they will never get out of the screen.

I do remember statements being made that corrections to an existing tax return can be made.

The advice generaly given was when in doubt: make a correction

• and do so swiftly before they who we do not name find out about it.

So until an answer from someone more knowledgeable turns up, this answer may point you to the right direction.

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If so, is there anything I can do now to resolve this?

The following may apply for this situation from: Tax Guide for US Citizens Abroad (pdf)

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General Tax Questions
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4) I forgot to include interest income when I filed my return last week. What should I do?

To correct a mistake of this sort, you should prepare Form 1040X. Include the omitted interest income, refigure the tax, and send the form as soon as possible along with any additional tax due to the Internal Revenue Service Center where you filed your return. Use Form 1040X to correct an individual Form 1040 income tax return filed for any year for which the period of limitation has not expired (usually 3 years after the due date of the return filed, or 2 years after the tax was paid, whichever is later).

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Form (and Instructions)
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1040X Amended US Individual Income Tax Return