IRS Releases Guidance on Foreign Financial Asset Reporting (Form 8938)
On December 15, 2011, the Internal Revenue Service stated that it will soon release the final version of a new information reporting form that taxpayers will use starting this coming tax filing season to report specified foreign financial assets for tax year 2011. Form 8938 (Statement of Specified Foreign Financial Assets) will be filed by taxpayers with specific types and amounts of foreign financial assets or foreign accounts. It is important for taxpayers to determine whether they are subject to this new requirement because the IRS imposes significant penalties for failing to comply.
The Form 8938 filing requirement was enacted in 2010 as part of FATCA to improve tax compliance by U.S. taxpayers with offshore financial accounts. The scope and the depth of the Form is even more profound that the FBARs.
Individuals who may have to file Form 8938 are U.S. citizens and residents, nonresidents who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory. Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds.
Form 8938 is not required of individuals who do not have an income tax return filing requirement.
The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts).
Failure to file Form 8938 when required may result in severe penalties – $10,000 with an additional penalty up to $50,000 for continued failure to file after IRS notification. Moreover, a 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. Other penalties may apply.
Finally, a special statute of limitation rules apply to Form 8938.
Contact Sherayzen Law Office For Tax Help with the IRS Form 8938
If you need any help with respect to understanding Form 8938 or to see whether you need to file this Form, contact Sherayzen Law Office Ltd. Our experienced international tax firm will explain to you the requirements of Form 8938 and help you comply with its requirements.