JANUARY 2012
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Guest Column

Additional Foreign Asset Reporting required by IRS

Kunal Jain

bY seema jain, cpa, pa

The Internal Revenue Service plans to release a new information reporting form (Form 8938) that taxpayers will need to use to report on certain types of foreign financial assets for tax year 2011. 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 new form 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. In this case, a married couple residing abroad and filing a joint return would not file Form 8938 unless the value of their specified foreign assets exceeded $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

It is important to note that 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) by June 30 of each year.

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.

Seema Jain, CPA, PA, can be reached at (813) 395-0089 or visit www.yourbizcpa.com

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