The IRS has announced in Updated Instructions to Form 8938, Statement of Specified Foreign Financial Assets, that certain retirement-type accounts located in jurisdictions with intergovernmental agreements (IGAs) do not have to be reported on Form 8938 for tax years beginning on or before December 12, 2014. This avoids a potential $10,000 reporting penalty. The applicable accounts are retirement and pension accounts, non-retirement savings accounts, and accounts satisfying certain regulatory conditions under Code Sec. 1471.
The Foreign Account Tax Compliance Act generally requires U.S. citizens, resident aliens, and others with an interest in specified foreign financial assets that exceed the reporting threshold to file Form 8938 to report the assets. Specified foreign financial assets include certain assets that are not in an account maintained by a U.S. or foreign financial institution.
The IRS has entered into IGAs with various foreign jurisdictions to implement FATCA’s reporting requirements. Under a Model 1 IGA, foreign financial institutions report their U.S. accounts to their home government, which transfers the information to the IRS. Under a Model 2 IGA, the institution reports its accounts directly to the IRS, supplemented by information exchanges between the governments.
The IRS has now announced that, for tax years beginning on or before December 12, 2014, if the foreign jurisdiction has an IGA in effect (or is treated as having an IGA in effect) on or before the last day of the taxpayer’s tax year, certain accounts do not have to be reported on Form 8938 if the accounts are excluded from the definition of a financial account in the IGA. However, the accounts must be reported on Form 8938 for tax years beginning after December 12, 2014.
Update to Instructions, Form 8938