Reporting Foreign Bank and Financial Accounts, Foreign Assets on your 2018 Tax Return

You may be obligated to report your foreign financial accounts on line using form 114. Failure to do so may cause the IRS to assess penalties of $10,000 or more .... and there are also criminal penalties. Learn more in the Forbes article HERE

Also if you have other types of foreign assets such as foreign corporations, foreign partnerships, foreign LLCS, foreign bonds, stocks, etc. you may be required to file form 8938 with your tax return or incur the same type of penalties.  READ MORE HERE

These rules are complex and compliance with the law is important. We are here to help you with these forms or your entire US resident, US expatriate or US nonresident tax return. Email us at ddnelson@gmail.com . We are US CPAS and Attorneys that deal exclusively with International Tax Issues and Returns.

Where Offshore Tax Form Evaders Live and Keep Their Foreign Accounts

From Forbes.  Looks like if you live in California or New York you are primary suspect based on IRS statistics.  http://www.forbes.com/sites/ashleaebeling/2014/02/20/gao-report-where-offshore-tax-evaders-live-and-bank/

US EXPATRIATE AND INTERNATIONAL TAX EXPERT ATTORNEY CPA TO SPEAK AT FREE PUBLIC SEMINAR ON FEBRUARY 12, 2014 IN PUERTO VALLARTA, MEXICO

FATCA AND IRS REPORTING FOR DUMMIES - INVESTING IN MEXICO MADE EASY

INTERCAM GRUPO FINANCIERO will Present a Seminar on February 12, 2014 in Puerto Vallarta at the Hotel Marriott Casa Magna featuring Don D. Nelson, US Attorney and CPA.  He is a US expatriate and international tax expert who has been assisting Americans in Mexico for over 23 years.  The seminar will be at 6pm.

He will speak on:

• IRS filing requirements for reporting Mexican and other foreign financial accounts and how to avoid penalties for failing to file in a timely manner.
• The new form 8938 required to report Mexican and other foreign financial assets
• The new on line filing requirements for FBAR (foreign bank account reporting).  Yes you can no longer file on paper.
• IRS Reporting for Mexican Businesses, Corporations, and real estate.
• What to do if you have not been filing your US tax returns or foreign assets reporting forms and how to reduce or avoid the high penalties that may be imposed.
• Current IRS audit procedures and policies for expatriates.
• And he will answer your other questions on US taxation of those who live and work in Mexico

Don's informative and useful tax websites are located at www.TaxMeLess.com and www.Expatattorneycpa.com

Contact intercam at 52-322-2090696 to reserve your space.

Mr. Nelson will also be presenting a seminar in Melaque  the next evening. Intercam can provide you with more information on that seminar.

FATCA, FBAR, 8938 and Foreign Financial Asset Reporting Seminar in Cabo San Lucas, Mexico on 6/21/13

FATCA and IRS Foreign Asset Reporting Seminar in Cabo San Lucas on 6/21/13 presented by Intercam and Don D. Nelson, Attorney and CPA - READ MORE

Expatriate Tax Return Due Dates- Nonresident Tax Return Due Dates

 U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return, generally have an automatic two-month extension beyond the regular Apr. 15 deadline to file their returns. The June 15 deadline is extended this year to June 17 since the extended due date falls on a Saturday. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be Apr. 15 or June 17 depending on sources of income.

U.S. citizens and resident aliens are legally required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. Treasury encourages taxpayers to file it electronically.

June 17 soon approaching. IRS reminded taxpayers that the filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Taxpayers are reminded to attach to their return the statement described above.

Need help with these filings?. Contact us at ddnelson@gmail.comm or www.TaxMeLess.com 

 

IRS Chart Comparing What to Include on Form 8938 and on FBAR Form (TDF 90-22.1)

The link below leads to the IRS Comparison Chart showing what  types of assets to include on Form 8938 and the FBAR form (TDF 90-22.1) or on both.  Both of these forms must be filed for 2011 if applicable or you risk a $10,000 penalty for each for failing to report foreign financial assets and foreign financial accounts.  If you need us to fill of these forms for you or review the form you self prepared for completeness and correctness, we do provide that service.

LINK TO IRS CHART

Email US for help

Latest IRS Guidance on When to File Forms 8938 and TDF 90-22.1 (FBAR)

The IRS has just published further information on when to file forms 8938 (to report foreign financial assets) and TDF 90-22.1 (FBAR) to report foreign financial accounts. Their guidance clarifies when foreign currency and precious metals located in foreign countries must be reported. The Chart is easy to understand and can be read HERE.

If you wish assistance in preparing these forms or wish to have your own self prepared forms reviewed by an expert contact us.

Form 8938 - Report of Foreign Financial Assets - Read when to file and what to file for here.

Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets”?

Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return.  Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below). Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010.  For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this coming tax filing season. Upon issuance of regulations, FATCA may require reporting by specified domestic entities.  For now, only specified individuals are required to file Form 8938. If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold. If you are required to file Form 8938, you do not have to report financial accounts maintained by: a U.S. payer (such as a U.S. domestic financial institution),  the foreign branch of a U.S. financial institution, or  the U.S. branch of a foreign financial institution. Refer to Form 8938 instructions for more information on assets that do not have to be reported. You must file Form 8938 if: 1. You are a specified individual.  A specified individual is: A U.S. citizen A resident alien of the United States for any part of the tax year (see Pub. 519 for more information) A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return  A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Pub. 570 for definition of a bona fide resident) AND 2. You have an interest in specified foreign financial assets required to be reported.  A specified foreign financial asset is: Any financial account maintained by a foreign financial institution, except as indicated above  Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely: Stock or securities issued by someone other than a U.S. person Any interest in a foreign entity, and  Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person. Refer to the Form 8938 instructions for more information on the definition of a specified foreign financial assets and when you have an interest in such an asset. AND 3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you: Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Taxpayers living abroad.  You are a taxpayer living abroad if: You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days. If you are a taxpayer living abroad you must file if: You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. Refer to the Form 8938 instructions for information on how to determine the total value of your specified foreign financial assets. Reporting specified foreign financial assets on other forms filed with the IRS. If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938.  However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets.  Even if a specified foreign financial asset is reported on a form listed above, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you. Basic Questions and Answers on Form 8938 1. What are the specified foreign financial assets that I need to report on Form 8938? If you are required to file Form 8938, you must report your financial accounts maintained by a foreign financial institution.  Examples of financial accounts include: Savings, deposit, checking, and brokerage accounts held with a bank or broker-dealer. And, to the extent held for investment and not held in a financial account, you must report stock or securities issued by someone who is not a U.S. person, any other interest in a foreign entity, and any financial instrument or contract held for investment with an issuer or counterparty that is not a U.S. person.  Examples of these assets that must be reported if not held in an account include: Stock or securities issued by a foreign corporation; A note, bond or debenture issued by a foreign person; An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap or similar agreement with a foreign counterparty; An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; A partnership interest in a foreign partnership; An interest in a foreign retirement plan or deferred compensation plan; An interest in a foreign estate; Any interest in a foreign-issued insurance contract or annuity with a cash-surrender value.  The examples listed above do not comprise an exclusive list of assets required to be reported. 2. I am a U.S. taxpayer but am not required to file an income tax return.  Do I need to file Form 8938? Taxpayers who are not required to file an income tax return are not required to file Form 8938.  3. Does foreign real estate need to be reported on Form 8938? Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938.  For example, a personal residence or a rental property does not have to be reported. If the real estate is held through a foreign entity, such as a corporation, partnership, trust or estate, then the interest in the entity is a specified foreign financial asset that is reported on Form 8938, if the total value of all your specified foreign financial assets is greater than the reporting threshold that applies to you.  The value of the real estate held by the entity is taken into account in determining the value of the interest in the entity to be reported on Form 8938, but the real estate itself is not separately reported on Form 8938.   4. I directly hold foreign currency (that is, the currency isn’t in a financial account).  Do I need to report this on Form 8938? Foreign currency is not a specified foreign financial asset and is not reportable on Form 8938. 5.  I am a beneficiary of a foreign estate.  Do I need to report my  interest in a foreign estate on Form 8938? Generally, an interest in a foreign estate is a specified foreign financial asset that is reportable on Form 8938 if the total value of all of your specified foreign financial assets is greater than the reporting threshold that applies to you. 6. I acquired or inherited foreign stock or securities, such as bonds.  Do I need to report these on Form 8938? Foreign stock or securities, if you hold them outside of a financial account, must be reported on Form 8938, provided the value of your specified foreign financial assets is greater than the reporting threshold that applies to you.  If you hold foreign stock or securities inside of a financial account, you do not report the stock or securities on Form 8938.  For more information regarding the reporting of the holdings of financial accounts, see FAQs 8 and 9. 7. I directly hold shares of a U.S. mutual fund that owns foreign stocks and securities.  Do I need to report the shares of the U.S. mutual fund or the stocks and securities held by the mutual fund on Form 8938?  If you directly hold shares of a U.S. mutual fund you do not need to report the mutual fund or the holdings of the mutual fund.  8.  I have a financial account maintained by a U.S. financial institution that holds foreign stocks and securities.  Do I need to report the financial account or its holdings?  You do not need to report a financial account maintained by a U.S. financial institution or its holdings.  Examples of financial accounts maintained by U.S. financial institutions include: U.S. Mutual fund accounts IRAs (traditional or Roth) 401 (k) retirement plans Qualified U.S. retirement plans Brokerage accounts maintained by U.S. financial institutions 9.  I have a financial account maintained by a foreign financial institution that holds investment assets.  Do I need to report the financial account if all or any of the investment assets in the account are stock, securities, or mutual funds issued by a U.S. person? If you have a financial account maintained by a foreign financial institution and the value of your specified foreign financial assets is greater than the reporting threshold that applies to you, you need to report the account on Form 8938.  A foreign account is a specified foreign financial asset even if its contents include, in whole or in part, investment assets issued by a U.S. person.  You do not need to separately report the assets of a financial account on Form 8938, whether or not the assets are issued by a U.S. person or non-U.S. person.      10.  I have a financial account with a U.S. branch of a foreign financial institution.  Do I need to report this account on Form 8938? A financial account, such as a depository, custodial or retirement account, at a U.S. branch of a foreign financial institution is an exception to the general rule that a financial account maintained by a foreign financial institution is specified foreign financial asset.  A financial account maintained by a U.S. branch or U.S. affiliate of a foreign financial institution does not have to be reported on Form 8938 and any specified foreign financial assets in that account also do not have to be reported.  11. I own foreign stocks and securities through a foreign branch of a U.S.-based financial institution.  Do I need to report these on Form 8938? If a financial account, such as a depository, custodial or retirement account, is held through a foreign branch or foreign affiliate of a U.S.-based financial institution, the foreign account is not a specified foreign financial asset and is not required to be reported on Form 8938 12. I have an interest in a foreign pension or deferred compensation plan. Do I need to report it on Form 8938? If you have an interest in a foreign pension or deferred compensation plan, you have to report this interest on Form 8938 if the value of your specified foreign financial assets is greater than the reporting threshold that applies to you. 13. How do I value my interest in a foreign pension or deferred compensation plan for purposes of reporting this on Form 8938? In general, the value of your interest in the foreign pension plan or deferred compensation plan is the fair market value of your beneficial interest in the plan on the last day of the year.   However, if you do not know or have reason to know based on readily accessible information the fair market value of your beneficial interest in the pension or deferred compensation plan on the last day of the year, the maximum value is the value of the cash and/or other property distributed to you during the year.  This same value is used in determining whether you have met your reporting threshold.  If you do not know or have reason to know based on readily accessible information the fair market value of your beneficial interest in the pension plan or deferred compensation plan on the last day of the year and you did not receive any distributions from the plan, the value of your interest in the plan is zero.  In this circumstance, you should also use a value of zero for the plan in determining whether you have met your reporting threshold.  If you have met the reporting threshold and are required to file Form 8938, you should report the plan and indicate that its maximum is zero.  14. I am a U.S. taxpayer and have earned a right to foreign social security.  Do I need to report this on Form 8938? Payments or the rights to receive the foreign equivalent of social security, social insurance benefits or another similar program of a foreign government are not specified foreign financial assets and are not reportable.

Reporting Foreign Financial Assets

For your 2011 Tax  Year you may be required to File Form 8938 to Report your foreign financial assets with your tax return. You may also be required to File Form TDF 90-22.1 to report your foreign bank and financial accounts.  Sometimes you may be required to file both forms!

CHART SETTING FOR REQUIREMENTS FOR FILING ONE FORM OR IF YOU ARE REQUIRED TO FILE  BOTH FORMS FOR 2011

DOWNLOAD FORM 8938
DOWNLOAD INSTRUCTIONS TO FORM 8938
DOWNLOAD FORM TDF 90-22.1 AND INSTRUCTIONS

If you need help with these forms, filing them out, preparation of the forms, or review of the forms you self prepared contact us at ddnelson@taxmeless.com.  We have 30 plus  years experience preparing these  and other complex international tax forms. Download our 2011 expatriate tax questionnaire HERE and send it to us by email or fax for a fee quote.

Final Form 8938- Statement of Foreign Financial Assets Released

US Taxpayers including US Citizens, US Permanent Residents, and US Expatriates  may have to file Form 8938 with their US Income tax returns for 2012 to report their foreign financial assets.  The estimated time to complete this form is 1 to 3 hours.

Every taxpayer with assets located outside the US should review the instructions to this form to determine if they must file it. Read the Instructions to Form 8938 here.   Failure to file the Form 8938 when required can result in severe monetary penalties and criminal prosecution.


View the 2012 tax  year Form 8938  here.

IRS Releases Guidance on Foreign Financial Asset Reporting

The Internal Revenue Service in coming days will release 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 law imposes significant penalties for failing to comply.

The Form 8938 filing requirement was enacted in 2010 to improve tax compliance by U.S. taxpayers with offshore financial accounts. 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.  For example, a married couple living in the U.S. and filing a joint tax return would not file Form 8938 unless their total specified foreign assets exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

The thresholds for taxpayers who reside abroad are higher. For example in this case, a married couple residing abroad and filing a joint return would not file Form 8938 unless the value of specified foreign assets exceeds $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted, and what information must be provided.

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).  For more go to the FBAR page on this website.

Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification.  A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. Special statute of limitation rules apply to Form 8938, which are also explained in the instructions.

Form 8938, the form’s instructions, regulations implementing this new foreign asset reporting, and other information to help taxpayers determine if they are required to file Form 8938 can be found on the FATCA page of irs.gov.

See TD 9567.

INVESTMENTS IN FOREIGN MUTUAL FUNDS AND OTHER INVESTMENTS REQUIRE MANY SPECIAL IRS FORMS

Investments in foreign stocks, investment companies, foreign corporations that hold investements, etc.  from a U.S. tax point of view a could be for a U.S. individual, pension fund, or trust a paperwork nightmare .  If you are thinking of investing in Foreign stocks, please remember your friends at the IRS.  Any investment gains you make will be offset by IRS penalties if you do not do the proper paperwork.  To comply with the rules and keep the the US taxes down you should be filing form 8621 each year with your tax return.

Do not buy foreign mutual funds (funds not sold in the US).  These are PFICs (“Passive Foreign Investment Companies”) and they create a metric ton of complexity and accounting expense for your U.S. income tax returns.  (This, by the way, is one of the U.S. government’s little non-tariff trade barriers, designed to discourage U.S. capital being deployed into foreign capital markets).
Remember your FBAR.  The account you open that will buy the stock will need to be reported on Form TD F 90-22.1.

Remember Form 8938.  This is the new reporting form for foreign financial assets, largely duplicating the FBAR reporting requirements.

Foreign tax credit.  Undoubtedly a tax of some kind will be imposed for the foreign country where the investment is located. This will end up on an individual return on Form 1116.   This form will allow you to take a foreign tax  credit against your US income tax paid on the investment income.

What if you die while owning foreign investments? Be sure you have a plan for simple transfer of your accounts to your heirs if you die.  The cost of probate procedures in many foreign countries  could eliminate any stock market profits you make.  If you set up a foreign trust to try to reduce those foreign estate costs, you will then have to file forms 3520 and 3520A each year to report that trust.

IRS Releases Draft of Instructions to Form 8938- 2011 Required Tax Form to Report Foreign Financial Assets

The IRS has released draft instructions to Form 8938. Form 8938 must be filed with your 2011 income tax return to report  Foreign Financial Assets if the total value of those assets exceed a reporting thresholds. Read the draft instructions here.    What ever happened to the IRS Paperwork Reduction Act which to our knowledge was never repealed. See the current IRS draft of Form 8938.  

It is interesting to note you do not have to report your ownership of foreign real estate unless it is held in a foreign trust, corporation, etc.   At this point in time, it also appears you do not have to report any gold or other assets buried in your back yard (abroad) or held in your personal safe in your offshore villa.

These drafts are still subject to revision before the end of 2011.

Amercian Citizens Abroad Call for Repeal of Foreign Bank Account Reporting on US Taxpayer Offshore Accounts

American Citizens Abroad (ACA) is advocating for the repeal of the draconian IRS rules requiring foreign banks withhold and report on foreign bank and financial accounts held by US taxpayers located  outside of the USA. Read the Forbes Magazine Article by clicking on this link.

IRS Issues another draft version of Form 8938 for foreign financial asset holders

 Form 8938, “Statement of Specified Foreign Financial Assets”

The IRS has issued another new draft Form 8938, “Statement of Specified Foreign Financial Assets,” which is available on IRS's website. Form 8938 will be used by individuals to report an interest in one or more specified foreign financial assets.

Background. For tax years beginning after Mar. 18, 2010, taxpayers with an interest in a “specified foreign financial asset” during the tax year must attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than $50,000. 

“Specified foreign financial assets” are: (1) depository or custodial accounts at foreign financial institutions, and (2) to the extent not held in an account at a financial institution, (a) stocks or securities issued by foreign persons, (b) any other financial instrument or contract held for investment that is issued by or has a counterparty that is not a U.S. person, and (c) any interest in a foreign entity. 

For most taxpayers on a Calendar year basis, this form will be due with their 2011 tax return.

The draft Form 8938 was released on June 22nd without instructions. However, the draft form references the instructions throughout, which indicates that they will likely be issued soon.

Part I of the draft form requires information about foreign deposit and custodial accounts, including the maximum value of any such account during the tax year. Part II has similar entries for “other foreign assets,” but notes that specified foreign financial assets that have been otherwise reported on Forms 3520, 3520-A, 5471, 8621, or 8865, do not have to be included on Form 8938. Part III asks for a summary of tax items attributable to the accounts and assets reported in Parts I and II, including associated items such as interest, dividends, and royalties. Part IV requires disclosure of the number of the filed forms referenced in Part II on which any foreign financial assets that were excepted from Part II were reported.

You  can be view the new draft  form on the IRS website at http://www.irs.gov/pub/irs-dft/f8938--dft.pdf. 

IRS ISSUES NEW DRAFT OF FORM 8938 TO BE USED IN 2011 TO REPORT FOREIGN FINANCIAL ASSETS

The IRS has issued a new draft of Form 8938, Statement of Specified Foreign Financial Assets which must be filed for 2011with returns to report foreign financial assets. The form is now more complex than the prior draft. This is not the final version  so there could be further changes before it is finalize. Download a pdf version of the draft form here.