Tax & Accounting Blog

New IRS Form to Report Foreign Assets

Global Tax Compliance, Information Reporting for Wealth Management, International Reporting & Compliance, ONESOURCE, Tax Information Reporting, Trust Tax, Trusts, US Income Tax Compliance, W-8 & W-9 Foreign Reporting January 3, 2012

The IRS recently released a draft of new Form 8938 that requires taxpayers to report on certain foreign financial assets for tax year 2011. This reporting is part of FATCA (Foreign Account Tax Compliance Act), which strives to improve compliance of U.S. taxpayers who have offshore assets. This new IRS filing requirement does not replace the taxpayer’s obligation to file a FBAR (Report of Foreign Bank and Financial Accounts) with the U.S. Treasury Department.

Unless an exception applies, a taxpayer must file this new form if he or she is a specified individual who owns specified foreign financial assets and the value of those assets exceeds the reporting threshold. Different thresholds apply based on marital status, filing election and whether the individual lives abroad. Details are found in the form instructions. Taxpayers must determine if they are subject to this new reporting requirement to avoid significant penalties beginning at $10,000 for failure to comply.

As of now, only individuals must file Form 8938. The IRS anticipates issuing regulations that will require a U.S. entity to file Form 8938 if the entity is formed to hold foreign assets and its value exceeds the appropriate threshold. But, U.S. entities are off the hook until the IRS issues these regulations or guidance.