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Posts tagged ‘Form 8938’

FBAR Form 8938 filings increase

FBAR, Form 8938 filings increase as taxpayers become more aware of reporting requirements

Six years ago, Congress passed the Foreign Account Tax Compliance Act (FATCA), which set in motion a wave of new reporting and disclosure requirements by individuals, foreign financial institutions, and others. In response, the IRS created a host of new rules and regulations; and new forms for these reporting requirements. One key FATCA form – Form 8938, Statement of Specified Foreign Financial Assets – has seen usage steadily increase since passage of FATCA, the IRS recently reported. At the same time, more individuals are filing a related form – FinCEN Form 114, Report of Foreign Bank and Financial Accounts (known as the FBAR), which reached a record high in 2015. (more…)

U.S. delays FATCA’s withholding, reporting and other rules for six months

The scheduled January 1, 2014 rollout of withholding, reporting and other rules in the Foreign Account Tax Compliance Act (FATCA) has been delayed six months, the Treasury Department and the IRS have announced. The six-month delay is expected to give the U.S. more time to conclude negotiations and sign agreements to implement FATCA with foreign governments. The Treasury Department and the IRS have not, however, delayed the rules for reporting by individuals.

Far-reaching scope

FATCA ‘s scope is very far reaching. FATCA requires certain foreign financial institutions (FFIs) to report information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions include not only banks, but also other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

FATCA also requires that some individuals holding financial assets outside the U.S. must report those assets to the IRS. The IRS has developed Form 8938, Statement of Specified Foreign Financial Assets. This reporting requirement is separate from the long-time reporting requirement under the Bank Secrecy Act to file an “FBAR” (Form TD F 90.22-1, Report of Foreign Bank and Financial Accounts).

Final rules

In early 2013, the Treasury Department and the IRS issued final FATCA regulations. The final rules require withholding agents to withhold 30 percent of certain payments (called “withholdable payments”) to FFIs unless the FFI has entered into a reporting agreement with the IRS. To avoid withholding under FATCA, a participating FFI must enter into an agreement with the IRS to:

  • Identify U.S. accounts,
  • Report certain information to the IRS regarding U.S. accounts, and
  • Withhold a 30 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.

Delay

The final regulations called for the gradual phasing-in of the FATCA rules beginning in 2014 and continuing through 2017. Now, the Treasury Department and the IRS have further delayed the start of some of the FATCA rules, including rules on withholding, reporting and due diligence by FFIs.  Withholding agents generally will be required to begin withholding on withholdable payments made after June 30, 2014 instead of December 31, 2013.

Withholding agents also generally will be required to implement new account opening procedures by July 1, 2014. In addition, Treasury and the IRS intend to modify the final regulations so that the information reports previously required from certain FFIs on U.S. accounts for the 2013 and 2014 calendar years will be required only for 2014 (with respect to   U.S. accounts identified by December 31, 2014).  Reporting by these FFIs would be required by March 31, 2015. Additionally, all qualified intermediary agreements that would otherwise expire on December 31, 2013 will be extended to June 30, 2014. The launch date of the IRS’s online FATCA registration site has also been delayed to August 19, 2013.

Agreements

Since FATCA became law, the U.S. has been negotiating with foreign jurisdictions to implement its reporting requirements. The U.S. has developed two model intergovernmental agreements (IGAs). The first model agreement (Model I) generally requires an FFI to report account information to its government, which, in turn, will exchange the information with the IRS.  Under the second model agreement (Model II), an FFI registers with the IRS and reports account information directly to the IRS. As of August 1, 2013, the U.S. has entered into IGAs with nine countries (Denmark, Germany, Ireland, Japan, Norway, Mexico, Spain, Switzerland, and the U.K.). The Treasury Department has reported that it hopes to conclude negotiations before 2014 with Argentina, Belgium, Korea, Malaysia, New Zealand, South Africa, and many other countries.

Individuals

FATCA’s rules for reporting by individuals are not delayed. Generally, FATCA requires taxpayers to file Form 8938 if he or she is a U.S. citizen, a resident alien, and in some cases, a nonresident alien. The taxpayer also must own a “specified foreign financial asset,” which includes any financial account maintained by an FFI unless specifically excluded. Additionally, the aggregate value of the specified foreign financial asset must exceed certain reporting thresholds.

For single individuals living in the U.S., the total value of the specified foreign financial assets must be more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For married couples filing a joint return and living in the U.S these amounts are $100,000 and $150,000. The threshold amounts are higher for taxpayers living outside the U.S.

Form 8938 is not a substitute for the FBAR. The forms have different filing requirements. Please contact our office for more details about the two forms and their filing requirements.  The IRS is also expected to issue rules on FATCA reporting by domestic entities if the entity is formed or used to hold specified foreign financial assets and the assets exceeds the appropriate reporting threshold. Until the IRS issues regulations, only individuals must file Form 8938.

FATCA is a very complex law, which impacts many taxpayers here and abroad. Please contact our office at (908) 725-4414 if you have any questions about FATCA.

IRS, FinCEN provide more foreign account filing extensions

The IRS and Treasury’s Financial Crimes Enforcement Network (FinCEN) have announced new extensions for certain filers to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (known as the “FBAR”).  At the same time, the IRS has suspended filing requirements under the Foreign Account Tax Compliance Act (FATCA) title of the Hiring Incentives to Restore Employment (HIRE) Act of 2010 for certain filers.

Reporting requirements

U.S. taxpayers may be required to report their foreign accounts under the long-standing FBAR rules or the new FATCA rules. In February 2010, FinCEN issued final FBAR regulations.  The IRS is currently developing FATCA rules.

FBAR extensions

In recent months, the IRS and FinCEN discovered that some taxpayers have experienced difficulties in meeting the FBAR deadlines. In response, the IRS provided an extended filing deadline (November 1, 2011) for filers having signature authority over, but no financial interest in, a foreign account in 2009 or earlier years for which the reporting deadline had been extended by Notice 2009-62 or Notice 2010-23.

FinCEN has extended the filing deadline for calendar year 2010 FBARs to June 30, 2012 for officers and employees of investment advisors that have signature authority over, but no financial interest in, foreign accounts of persons that are no registered investment companies under the Investment Company Act of 1940. Earlier in 2011, FinCEN extended the filing deadline for 2010 FBARs for certain financial professionals.

FATCA forms

Taxpayers will use new Form 8938, Statement of Foreign Financial Assets to report under FATCA. However, the IRS has not yet published Form 8938. Therefore, the IRS has suspended the filing requirement until it publishes Form 8938. The IRS also has suspended the filing requirement under FATCA for Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, until that form is revised. After the forms are released, taxpayers will be required to file the forms for the year in which the filing requirement was suspended.

If you have questions about the FBAR or FATCA filing requirements, please contact our office.