Reporting Foreign Assets and Offshore Accounts

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1 Reporting Foreign Assets and Offshore Accounts ( and Form 8938) Commissioner Shulman (June 2009) For individuals with overseas income and assets, it s much more straightforward. If you are a U.S. taxpayer holding overseas assets, you must pay your taxes or we will be focused on finding you. It s as simple as that. 2 Objectives Milestone Dates Reporting requirements FATCA (Form 8938) Comparing the two reports 3 1

2 Milestone Dates Bank Secrecy Act (BSA) Report of Foreign Bank and Financial Accounts () Hiring Incentives to Restore Employment (HIRE) Act Foreign Account Tax Compliance Act (FATCA) and Form Two Reporting Regimes 1. TD F , Report of Foreign Bank and Financial Accounts () Title 31, 5314 Stand-alone report, due June Form 8938, Statement of Specified Foreign Financial Assets Title 26, 6038D Attached to Income Tax Return 5 Treasury Department Form Must Be Received by June 30th Internal Revenue Service Form Attached to Income Tax Return 2

3 - Who Must File? Any United States person who: has a financial interest in, or signature authority over financial accounts in a foreign country If aggregate value of accounts exceeds $10,000 at any time during calendar year 7 Form Who Must File? Specified individuals with an interest in specified foreign financial assets, exceeding the applicable reporting threshold: Unmarried or MFS and living in US: $50,000 / $75,000 Married and living in US: $100,000 / $150,000 Taxpayers living abroad: (S or MFS) $200,000 / $300,000 (MFJ) $400,000 / $600,000 8 What Needs to be Reported? : * Foreign financial accounts * Foreign financial accounts, * Foreign financial investment assets not held in an account, including: Stock or securities Interest in a foreign entity Instrument or contract held for investment by non-u.s. issuer or counterparty 9 3

4 Foreign Assets Reportable? Financial Account. Held at a foreign financial institution Held by a foreign branch of a U.S. financial institution 10 Foreign Assets Reportable? Foreign Stock or Securities not held in a Financial Account Foreign Mutual Funds or similar pooled funds 11 Foreign Assets Reportable? Foreign Hedge Funds And Foreign Private Equity Funds 12 4

5 Foreign Assets Reportable? Foreign Real Estate... Held directly Held through a Foreign Entity (but, the foreign entity itself is a SFFA) 13 Foreign Assets Reportable? Foreign Partnership Interest Indirect interests in Foreign Financial Assets through an Entity 14 Figuring Maximum Value * Periodic Account Statements * Acct stated in non-u.s. Currency, use TFMS rate at year-end : * Fair Market Value * Periodic account statements * Rules for non-account assets * Asset denominated in non-u.s. Currency, use TFMS rate at yearend 15 5

6 Joint Ownership : * If only reportable accounts are jointly owned with spouse, file single * Other joint owners, file separate s reporting entire value * Spouses filing joint return, file single reporting maximum value of assets * Other joint owners, file separate s reporting maximum value of assets 16 Exceptions to Reporting : * Consolidated * Military banking facility * Others (see instructions for ) * Assets reported on certain other forms timely filed with the IRS * Accounts/assets maintained by certain dealers or traders * Others (see instructions for Form 8938) 17 When and How to File? Must be received on or before June 30 (no extensions) ECC-Detroit (mailed or e-filed) Retain records for five years Form 8938: Attached to Annual Tax Return Filed by due date (including extensions) Retain records for three years 18 6

7 Civil Penalties n-willful, up to $10K; Willful, up to the greater of $100K or 50% of account balances Form 8938: Up to $10K for failure to disclose for each 30 days of non-filing after IRS notification, for a potential max penalty of $60K 40% of underpayment attributable to undisclosed financial asset 19 Professional Responsibility Diligence as to Accuracy (Circular 230) Should make reasonable inquiries when client provides information suggesting participation in overseas transactions/ accounts subject to and Form 8938 Should advise client of potential penalties associated with noncompliance of and Form 8938 requirements 20 Resources IRS.gov and FinCEN.gov questions to [email protected] Callers within the U.S. dial Callers outside the U.S. dial Form 8938: IRS.gov ww.irs.gov/businesses/corporations/infor mationforustaxpayers 21 7