The IRS pursuit continues…..

Just in time for the holiday season, the IRS has released regulations for certain persons who hold “specified foreign financial assets.” FATCA contains a number of provisions that are intended to make it more difficult to use foreign accounts to shelter income from US tax.

New disclosure form. A new form, Form 8938, Statement of Specified Foreign Financial Assets, that will need to be filed by certain taxpayers for tax year 2011. The form must be included with your tax return each year in which the aggregate balance of your foreign financial assets exceeds $50,000 on the last day of the year or more than $75,000 at any time during the tax year.

Who must file? The new filing requirement generally applies to individuals with specified foreign financial assets.

The foreign financial assets generally include:
1. Any financial account maintained by a foreign financial institution
2. If not held at an account at a financial institution
o Stock or securities issued by foreign persons;
o Any other financial instrument or contract held for investment issued by non US person; and
o Any interest in a foreign entity
If you have been filing Form TD F 90-22.1, Report of Foreign Bank Account and Financial Accounts (FBAR’s), or Form 5471, Information Return of US Person with Respect to Certain Foreign Corporations, the new disclosure may seem redundant. However, situations exist where a foreign asset may be required to be reported on both the FBAR and the new disclosure form.

Penalties for Non-Compliance . If you fail to file, FATCA imposes a $10,000 penalty in addition to a 40% penalty on any understatement of tax attributable to undisclosed financial assets.

The US reporting requirements are getting tighter. If you feel you need assistance in this area, please contact us.

As we have reminded you periodically, taxpayers are required to file form TD F 90-22.1 (FBAR) annually if the U.S. person or entity has a financial interest in or signature authority over any foreign financial account, including a foreign bank or brokerage account, if the aggregate value of all such accounts exceeds $10,000 at any time during the calendar year. This filing is due by June 30 of the year following the reporting year. Read More