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
Milestone Dates 1970 - Bank Secrecy Act (BSA) Report of Foreign Bank and Financial Accounts () 2010 - Hiring Incentives to Restore Employment (HIRE) Act Foreign Account Tax Compliance Act (FATCA) and Form 8938 4 Two Reporting Regimes 1. TD F 90-22.1, Report of Foreign Bank and Financial Accounts () Title 31, 5314 Stand-alone report, due June 30 2. 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
- 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 8938 - 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
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
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
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
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 10.22 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 Email questions to questions@irs.gov Callers within the U.S. dial 866-270-0733 Callers outside the U.S. dial 313-234-6146 Form 8938: IRS.gov ww.irs.gov/businesses/corporations/infor mationforustaxpayers 21 7