Preparation of Your 2011 Tax Return May Be Much More Complicated Than You Think: Beware of a New IRS Reporting Requirement for This Tax Season


Separate and apart from U.S. taxpayer's obligations to annually file a Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1, FBAR) with the U.S. Department of Treasury, U.S. citizens, certain U.S. non-resident aliens and non-resident aliens who elected to be taxed as a resident of the United States will now have another reporting obligation, starting with tax year 2011. In the latest attempt to ferret out U.S. taxpayers hiding assets overseas, Congress now requires filing with the IRS new Form 8938, Statement of Specified Foreign Financial Assets.

Presently, Form 8938 generally must be filed by any individual who holds an interest in specified foreign assets with an aggregate value exceeding $50,000 ($100,000 for joint filers) as of December 31 or $75,000 ($150,000 for joint filers) at any time during the tax year. Additionally, the reporting requirement applies to disregarded entities, such as single-member limited liability companies whereby the individual is considered the owner and bears the Form 8938 filing responsibility.

Specified foreign financial assets include:

  • financial accounts, depository or custodial, maintained by foreign financial institutions; and
  • other assets not held in accounts maintained by financial institutions, such as stock or securities issued by non-U.S. persons, financial instruments or contracts with issuers or counterparties (e.g., currency swaps, other swap contracts, options and other derivative contracts) that are non-U.S. persons, and any interest in a foreign entity.

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Published In: Business Organization Updates, Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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