In Reporting of Offshore Accounts (Part 1), we discussed the requirements of disclosing and reporting foreign accounts on Schedule B of Form 1040 and the FBAR form. For the year 2011 the IRS has issued a new Form 8938 Statement of Specific Foreign Financial Assets. The reporting threshold varies depending on whether an individual lives in the United States, is married, or files a joint income tax return with his or her spouse.
Exception – if you do not have to file an income tax return for the tax year, you do not need to file Form 8938 even if the value of the specified foreign financial assets is more than the appropriate reporting threshold.
Who must file – you are a specified individual of you are one of the following:
- A resident alien of the United States for any part of the tax year
- A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return
Determining the Reporting Threshold that Applies to You:
|
Specified foreign financial asset is more than: |
Unmarried taxpayer living in U.S. |
Married taxpayer filing joint return living in U.S. |
Married taxpayer filing separate return living in U.S. |
Taxpayers living abroad, a bona fide resident of a foreign country |
|
On the last day of the year |
$50,000 |
$100,000 |
$50,000 |
Single $200,000 Joint $400,000 |
|
At any time during year |
$100,000 |
$200,000 |
$100,000 |
Single $400,000 Joint $600,000 |
Specified Foreign Financial Assets:
- Any financial account maintained by a foreign financial institution.
- Other foreign financial assets which include any of the following assets that are held for investment maintained in an account:
–Stock or securities issued by someone other than a U.S. person,
–Any interest in a foreign entity, and
–Any financial instrument or contract that has an issuer or counterparty that is other than a U.S. citizen
Failure to File Penalty – If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), you may be subject to a penalty of $10,000. If you do not file Form 8938 within 90 days of notification from the IRS, you may be subject to a $10,000 penalty for each 30 day period that the form is not filed. This additional penalty is limited to $50,000.
This may not affect most taxpayers. However, for those that might have to file, you should take some time to review your investments to determine if you do own any specific foreign financial assets and then if you meet the filing threshold. Please contact your ShindelRock [1] tax professional to assist you with complexities of this regulation.