by Brian Mahany
Just as the dust starts to settle on the offshore amnesty (OVDI) and FBAR rules, the IRS gives us a new form with more rules and more penalties for the unwary.
As part of the Foreign Asset Tax Compliance Act (FATCA) and the Hire Act of 2010, Congress mandated that for tax years beginning after March 18, 2010, U.S. taxpayers now must report certain foreign assets. This reporting is in addition to the already required Report of Foreign Bank and Financial Account, also known as an aFBAR.
Here is a basic summary of the rules:
* Single Taxpayer Living In US – must report if foreign assets exceed $50,000 on last day of tax year or ever exceed $100,000 during the year.
* Married Taxpayers Living in US and filing jointly – see above, $100,000 /$200,000 threshold.
* Married Taxpayer Living in US and not filing jointly – see above, $50,000 / $100,000 threshold.
* Taxpayers Living Abroad not filing jointly – see above, $200,000 / $400,000 threshold.
* Taxpayers Living Abroad filing jointly – see above, $400,000 / $600,000 threshold.
What assets are reportable? According to the draft regulations, these include financial accounts and stock issued by a non U.S. person, interests in foreign entities and financial instruments or contracts issued by a non U.S. person.
Sound confusing? It is. There are complex rules dealing with currency conversion and exchange rates and accounts shared with other people or entities, among other things.
The draft form and instructions are available from the IRS website. The form number – the IRS has a form for everything – is Form 8938.
It is important to note that completion of the new form 8938 does not eliminate the need to also disclose foreign financial accounts on the annual FBAR return.
As with the existing offshore reporting requirements, hundreds of thousands of taxpayers will likely fail to file simply because they don’t understand the law or don’t even know of it. We are surprised that even months after the end of the IRS’s offshore amnesty program, people still call our office because they just learned of their FBAR requirement.
If you have any questions regarding FBAR’s, offshore reporting or the voluntary disclosure process, contact a tax attorney or CPA well versed with foreign reporting requirements. Most are not. If you have an interest in a foreign business or account, Turbo Tax and other tax return software is probably not for you.
The tax lawyers at Mahany & Ertl can answer your questions of FBARs and foreign asset reporting. Contact attorney Brian Mahany directly at (414) 704-6731 (direct) or by email at All inquiries, of course, are strictly confidential.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and San Francisco, California. Tax services nationwide.
* The above summary represents draft instructions and rules, some of which are not final. As with all our blog posts, this information is only for general information. We cannot give legal advice to nonclients nor can we give such advice through a blog.