Foreign property inherited. How to report and how to report rental income from foreign property?

[MrTai]

My wife's parents passed away and left her one condos and one commercial property in Taiwan. Both were fully paid. 100% ownership. Taxes were paid in Taiwan for both. This was in 2016. The commercial property had a tenant and is the tenant is still there. The condo has since been rented and has a current tenant. 

I'm now filing 2023 taxes. What forms or process do I need to take to account for any income received for these two properties? How far back do I need to report? I see that I can only amend my taxes for the past 3 years.  

[Vanessa A · Accepted solution]

You would need to amend your taxes all the way back to 2016.  The IRS does not allow you to claim a refund for taxes further back than 3 years, but they do expect you to fix any underreporting of income as far back as you find the under-reporting. 

To report the foreign rental income, you will select 

1. Income
2. Rental Properties and Royalties
3. When setting up the property, select foreign and add the foreign address. 

"Sec. 6501(e)(1) provides that the period for assessment of taxes is extended to six years when there has been an omission from gross income on a return of an amount more than 25% of the gross income stated in the return. Sec. 6501(e)(2) provides a similar rule for omissions from the reportable value of a gross estate or total gifts of items includible on a filed estate or gift tax return, and Sec. 6501(e)(3) provides a similar rule for returns of certain excise taxes. In addition, Sec. 6501(e)(1)(ii) extends the period to six years for failure to report specified foreign financial assets whose total value exceeds $5,000."  Journal of Accountancy

You may want to work with a local tax professional to fix your underreporting of income since 2016.