New Reporting Requirements for Foreign Financial Assets
Mineola, NY – Taxpayers with foreign financial assets in excess of $50,000 must report information about those assets on the new Form 8938, which must be attached to the taxpayers’ U.S. income tax returns. These new reporting rules under the Foreign Account Tax Compliance Act (“FATCA”), which intends to combat offshore tax evasion, require the reporting of “specified foreign financial assets.” Specified foreign financial assets include financial accounts maintained by foreign institutions, stocks or securities issued by a non-U.S. person, any interest in a foreign entity and any financial instrument or contract that has as a non-U.S. issuer or counter party.
Failure to file the new Form 8938 or an understatement of tax related to an undisclosed specified foreign asset carry substantial monetary penalties and the statute of limitations will remain open until three years after the date when a complete Form 8938 is filed. In addition, the taxpayer may face criminal prosecution and criminal penalties.
The new form 8938, Statement of Foreign Financial Assets is in addition to the existing foreign assets reporting forms which must be filed and include TDF 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”); Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations; Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships and Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
Please contact one of the attorneys in the Tax Law Group at Meltzer, Lippe, Goldstein & Breitstone, LLP for more information on these new filing requirements.
Due the general nature of its contents, this newsletter is not and should not be regarded as legal advice.