U.S. citizens and green card holders living outside of the United States will have to file a new form (Form 8938) to list all their personal foreign financial assets along with their 1040 required to be filed on or before April 15, 2012.
The new IRS ruling results from FATCA (Foreign Account Tax Compliance Act) legislation that begins with fiscal year 2011. The new Form 8938 is to list all the tax payer’s personal foreign financial assets along with their 1040. This form must be filed in addition to the FBAR (Foreign Bank Account Report) Form that is sent separately to the U.S. Treasury Department.
The reporting requirements of Form 8938 are more comprehensive and more complicated than those for the FBAR. However, 8938 reporting is required only on personally owned assets. It does not include any foreign accounts over which the tax payer has only signatory authority but no financial interest, contrary to the requirements for the FBAR.
The 8938 reporting threshold of foreign assets depends on whether you are a bona fide overseas resident or a United States resident and whether you file “married filing jointly” or otherwise. Draft versions of Form 8938 and the instructions are available as of November 2011.
The link to the instructions is www.irs.gov/pub/irs-dft/i8938--dft.pdf. The link to the form is www.irs.gov/pub/irs-dft/f8938--dft.pdf.
FATCA also requires all foreign financial institutions, including banks, brokers, pension funds, insurance companies, hedge funds, mutual funds and trusts to report to the United States Internal Revenue Service all holdings of their clients who are U.S. citizens or U.S. green card holders. This will come into force on January 1, 2014 and will allow the IRS to cross-check between reports of foreign financial institutions and individual filings of Form 8938.
Those with such financial holdings as those afore mentioned might be well advised to contact their tax experts and accountants soon.
For more detailed information on the FATCA legislation, check out the American Citizens Abroad website at www.americansabroad.org.