New Tax Rules

Found this on TOB, this is sure different than what was being stated here recently.


The following was sent to me from my tax preparer in the states with the most recent laws. Not sure this differs from a previous thread, but will print it here anyway. Too much information is never a problem.

Individuals must report specified foreign financial assets on new Form 8938 for 2011 tax year
Final Version of Form 8938 (Statement of Specified Foreign Financial Assets)

As recently announced in IR 2011-117 (see article “Regs flesh out foreign asset reporting which begins this filing season” that appeared in Newsstand e-mail 12/16/2011), IRS has released the final version of Form 8938 (Statement of Specified Foreign Financial Assets) and its Instructions, which individuals must use to report specified foreign financial assets under Code Sec. 6038D for tax year 2011. Until IRS issues regs in the future, only individuals, and not specified domestic entities, must file Form 8938. The Instructions carry a number of examples of who does and doesn't have to file Form 8938.

Background. For tax years beginning after Mar. 18, 2010, the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act, P.L. 111-147) provides that individuals with an interest in a “specified foreign financial asset” during the tax year must attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than $50,000 (or a higher dollar amount as IRS may prescribe). (Code Sec. 6038D(a)) In addition, to the extent provided by IRS in regs or other guidance, Code Sec. 6038D applies to any domestic entity formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets, in the same manner as if the entity were an individual. (Code Sec. 6038D(f))

“Specified foreign financial assets” are: (1) depository or custodial accounts at foreign financial institutions, and (2) to the extent not held in an account at a financial institution, (a) stocks or securities issued by foreign persons, ( any other financial instrument or contract held for investment that is issued by or has a counterparty that is not a U.S. person, and © any interest in a foreign entity. (Code Sec. 6038D( )

A specified person who fails to provide required information for any tax year is subject to a $10,000 penalty. A failure continuing for more than 90 days after the day on which IRS mails a notice of the failure to the specified person subjects the specified person to an additional penalty of $10,000 for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired, up to a maximum penalty of $50,000 for each such failure. (Code Sec. 6038D(d)) No penalty applies if the failure was due to reasonable cause and not willful neglect. (Code Sec. 6038D(g))
In Notice 2011-55, 2011-29 IRB 53, IRS suspended the Code Sec. 6038D reporting requirements until it releases Form 8938 (see Federal Taxes Weekly Alert 06/23/2011). Individuals for whom the filing of Form 8938 was suspended for a tax year will have to attach the form for the suspended tax year to their next income tax return required to be filed with IRS.
In October of 2011, IRS released a draft version of Form 8938 (see Federal Taxes Weekly Alert 10/06/2011).
For recently issued temporary and proposed regs on the Code Sec. 6038D reporting requirement (see article “Regs flesh out foreign asset reporting which begins this filing season” that appeared in Newsstand e-mail 12/16/2011).

Who must file Form 8938. Unless an exception applies, a taxpayer must file Form 8938 if: (1) they are a specified person that has an interest in specified foreign financial assets; and (2) the value of those assets is more than the applicable reporting threshold.
Observation: The Instructions note that specified persons aren't required to file Form 8938 for any tax year for which they aren't required to file an annual return, even if the value of their specified foreign financial assets is more than their applicable reporting threshold.

A specified person includes any specified individual or—to the extent provided in future regs—a specified domestic entity if it is formed or availed of to hold specified foreign financial assets. If the value of the specified foreign financial assets is more than the appropriate reporting threshold and no exception applies, taxpayers must file Form 8938 even if none of the specified foreign financial assets affect their tax liability for the tax year. Generally, a specified individual is: a U.S. citizen; a resident alien of the U.S. 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; or a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico.
If a taxpayer and his spouse file a joint return (and so would file one combined Form 8938 for the tax year), he must include the value of the asset jointly owned with his spouse only once to determine the total value of all of the specified foreign financial assets that they own. If a taxpayer and his spouse are specified individuals and each files a separate return, he includes one-half of the value of the asset jointly owned with his spouse to determine the total value of all of his specified foreign financial assets. If a taxpayer has joint ownership with a spouse who isn't a specified individual or someone other than a spouse, each joint owner includes the entire value of the jointly owned asset to determine the total value of all of that joint owner's specified foreign financial assets.

Individuals living in the U.S. The following reporting thresholds apply to taxpayers living in the U.S.:
• An unmarried taxpayer satisfies the reporting threshold only if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Illustration 1: Bev isn't married and doesn't live abroad. She sold her only specified foreign financial asset on October 15, when its value was $125,000. Held: Bev has to file Form 8938. She satisfies the reporting threshold even though she doesn't hold any specified foreign financial assets on the last day of the tax year because she did own specified foreign financial assets of more than $75,000 at any time during the tax year. (Instructions for Form 8938, page 3)
Illustration 2: Anne isn't married and doesn't live abroad. Anne and an unrelated U.S. resident jointly own a specified foreign financial asset valued at $60,000. Held: Each has to file Form 8938 because each satisfies the reporting threshold of more than $50,000 on the last day of the tax year. (Instructions for Form 8938, page 3)
• Married taxpayers filing a joint income tax return satisfy the reporting threshold only if the total value of their specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 any time during the tax year.
Illustration 3: Carl and his wife file a joint income tax return and do not live abroad. They jointly own a single specified foreign financial asset valued at $60,000. Held: They do not have to file Form 8938 cause they do not satisfy the reporting threshold of more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. (Instructions for Form 8938, page 3)
Illustration 4: David and Cindy do not live abroad. They file a joint income tax return, and jointly and individually own specified foreign financial assets. On the last day of the tax year, they jointly own a specified foreign financial asset with a value of $90,000. Cindy also has a separate interest in a specified foreign financial asset with a value of $10,000, while David has a separate interest in a specified foreign financial asset with a value of $1,000. Held: David and Cindy must file a combined Form 8938. They have an interest in specified foreign financial assets in the amount of $101,000 on the last day of the tax year—i.e., ($90,000, the entire value of the specified foreign financial asset that they jointly own, + $10,000, the value of the asset that Cindy separately owns, + $1,000, the value of the asset that David separately owns). David and Cindy satisfy the reporting threshold of more than $100,000 on the last day of the tax year. (Instructions for Form 8938, page 3)
• A married taxpayer filing a separate income tax return satisfies the reporting threshold only if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Illustration 5: Fred and Ethel do not live abroad. They file separate returns, and jointly own a specified foreign financial asset valued at $60,000 for the entire year. Held: Neither has to file Form 8938. They each use one-half of the value of the asset, $30,000, to determine the total value of specified foreign financial assets that they each own. Neither satisfies the reporting threshold of more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. (Instructions for Form 8938, page 3)
Individuals living abroad. The following reporting thresholds apply to a taxpayer living abroad—i.e., whose tax home is in a foreign country and who is (1) a U.S. citizen who has been a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year; or (2) a U.S. citizen or resident who is present in a foreign country at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported:
• A taxpayer who doesn't file a joint return satisfies the reporting threshold if the total value of his specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.
Illustration 6: Dan and Betty live abroad and file separate income tax returns. Betty isn't a specified individual. On the last day of the tax year, Betty and Dan jointly own a specified foreign financial asset with a value of $150,000. Betty has a separate interest in a specified foreign financial asset with a value of $10,000, while Dan has a separate interest in a specified foreign financial asset with a value of $60,000. Held: Dan has to file Form 8938 but Betty, who isn't a specified individual, doesn't. Dan has an interest in specified foreign financial assets in the amount of $210,000 on the last day of the tax year—i.e., $150,000, the entire value of the asset that he jointly owns, + $60,000, the entire value of the asset that he separately owns). He satisfies the reporting threshold for a married individual living abroad and filing a separate return of more than $200,000 on the last day of the tax year. (Instructions for Form 8938, page 3)
• A married taxpayer who files a joint income tax return satisfies the reporting threshold only if the total value of all specified foreign financial assets he or his spouse owns is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.
Form 8938, Statement of Specified Foreign Financial Assets (Nov. 2011) can be viewed on the IRS website at http://www.irs.gov/pub/irs-pdf/f8938.pdf. The Instructions for Form 8938 (Nov. 2011) can be viewed at http://www.irs.gov/pub/irs-pdf/i8938.pdf.
RIA Research References: For reporting requirement for individuals with foreign assets, see FTC 2d/FIN ¶ S-3650.1; United States Tax Reporter ¶ 60,38D4; TaxDesk ¶ 815,516.
Source: Federal Tax Updates on Checkpoint News tab 12/21/2011
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