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New 2011 reporting requirement for foreign
financial assets:
A new law requires U.S. taxpayers who have an interest in certain
specified foreign financial assets with an aggregate value exceeding
$50,000 to report those assets to the IRS. This reporting will
be required beginning in 2012. Taxpayers who are required to
report must submit Form 8938 with their tax return. See
Notice 2011-55 for additional information about this
reporting requirement under IRC section 6038D.
Under FATCA, U.S. taxpayers with
specified foreign financial assets that exceed certain thresholds
must report those assets to the IRS. This reporting will be made on
Form 8938, which taxpayers attach to their federal income tax
return, starting this tax filing season. In addition, FATCA will
require foreign financial institutions to report directly to the IRS
information about financial accounts held by U.S. taxpayers, or held
by foreign entities in which U.S. taxpayers hold a substantial
ownership interest.
Form 8938, is required when
the total value of specified foreign assets exceeds
certain thresholds. For example, taxpayers married filing joint need to
file Form 8938 when their total specified foreign
assets exceed $100,000 on the last day of the tax
year or more than $150,000 at any time during the
tax year.
Specified
foreign assets
- Any
financial account maintained by a foreign
Institution or any
other foreign assets held for
investment such as stock issued by a foreign person,
any interest held in a foreign entity and any
financial contract that has as an issuer or
counter-party other than a US citizen.
If residing abroad then married
filing joint need to file Form 8938 when their total
specified foreign assets exceeded $400,000 on the
last day of the tax year or more than $600,000 at
any time during the year.
Failing to file Form 8938 when
required results in the assessment of a $10,000 late
filing penalty, with an additional penalty up to
$50,000 for continued failure to file after IRS
notification. A 40 percent penalty on any
understatement of tax attributable to non-disclosed
assets can also be imposed.
Statement of Specified Foreign Financial Assets:
-
Form 8938 may be due if you owned or had
signature authority over more than $50,000 "value"
overseas.
-
"Value" includes: financial
accounts, non-US stocks or securities, interest in a
foreign entity, financial instrument with a non-US
counterparty
-
Late filing penalty is up to
$10,000 for mere oversight.
-
If the failure to file timely was
willful, then forfeiture of up to $50,000.
-
If the income from these same
foreign sources was not taxed (for example, on form
1040) then an additional substantial understatement
penalty of 40% may be assessed
-
For timely filing, include form
8938 with your regular income tax return (including
form 1040, 1065, 1120-S and so forth).
Comparison of Form 8938 and FBAR Requirements:
http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements
Foreign Account Tax Compliance Act (FATCA):
http://www.irs.gov/businesses/corporations/article/0,,id=236667,00.html
Form 8938
Instructions for Form 8938 (pdf)
Form 8621
Instructions for Form 8621 (pdf)
Form 5471
Instructions for Form 5471 (pdf)
Reports of Foreign Bank and Financial Accounts
(FBAR):
-
FBAR is due if you owned or had
signature authority over more than $10,000 value
overseas.
-
Late filing penalty is up to
$10,000 for mere oversight.
-
If the failure to file timely was
willful, then the penalty cap is raised to a forfeiture of 50% of the highest value
of the foreign accounts up to $100,000.
-
On top of the civil penalty
(above), the failure to file can also be subject to
criminal prosecution under 31 U.S.C. section
5322(a).
-
For timely filing the FBAR must be
at the offices of
the U.S.
Treasury by the last business day before July 1st
of each year. Amended FBAR may be filed 120
days thereafter.
Form TD F 90-22.1
Instructions for Form TD F 90-22.1 found on page 6 (pdf)
(FAQ) (FBAR
filing requirements) (FBAR
financial accounts definition)
(IRS
Guidance)
("Clarification
rule" from U.S. Treasury effective March 28, 2011)
(efiling
of FBAR, rather than paper file) (ed. about 10x more effort
involved than paper filing)
e-file FBAR form 90-22.1 (due date is
RECEIVED at the offices of the U.S. Treasury by the last business day prior to July 1st
of each year)
http://bsaefiling.fincen.treas.gov/Enroll_Individual.html
Association of Americans Resident Overseas
position paper
Older page of
FAQ
Introduction to International Issues - National Taxpayer Advocate's
2011 Annual Report to Congress
(pdf)
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