By: Coleman Jackson, Attorney, Certified Public Accountant
May 06, 2019
Statement of Specified Foreign Financial Assets is Department of Treasury (internal Revenue Service’s Form 8938. Form 8938 is filed with the taxpayers’ annual tax return. Internal Revenue Code Sec. 6038D mandates that specified individuals, who include U.S. citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold must annually report those specified foreign assets using Form 8938. The federal tax law that mandates these reporting requirements was enacted by the U.S. Congress and signed into law by President Obama in 2010. The law is entitled the Foreign Account Tax Compliance Act (FATCA). The law’s stated purpose is to combat tax evasion by U.S. taxpayers using foreign bank accounts and assets. This law is separate and distinct from the better known Bank Secrecy act enforced by the Financial Crimes Network (FinCen) mandating foreign accounts disclosures under the FBAR requirements. We have discussed the FBAR requirements in prior blogs on a number of occasions. We will not repeat those discussions here. Interested readers should look up our prior blogs for discussions regarding the FBAR and the penalties associated with violation of the FBAR reporting requirements. You can read all of our blogs at http://www.cjacksonlaw.com/blog/.
For now, let’s return to our discussion of FATCA and Form 8938. Specified individuals with foreign assets meeting a certain reporting threshold must report their foreign financial assets to the Internal Revenue Service annually using Form 8938. The term, “Foreign Financial Assets” under FATCA is defined broader than mere foreign deposit and custodian accounts; FATCA applies also to “Other Foreign Assets”, which could be any property, including virtual property interest of Specified Individuals. For example, the term other foreign asset could apply to foreign land, foreign buildings & equipment, foreign business interest, such as ownership interest in a foreign partnership, corporation, trust, or estate if the reporting threshold is met for the tax period. Further, other foreign assets also could apply to Specified Individuals’ interest in foreign stocks, bonds, debentures, virtual currency and, practically speaking, wealth or value formulated in any other form and composition if the reporting threshold is met for the tax period. The point is this; the definition of the term ‘asset’ is interpreted broadly under FATCA.
To summarize, specified individuals must annually report their interest in specified foreign financial assets using Form 8938 if the values of the assets are $50,000 on the last day of the tax year or $75,000 at anytime during the tax year (higher reporting threshold amounts apply to married individuals filing jointly and individuals living abroad). Fair market value in U.S. dollars is used to compute the asset value pursuant to the IRS instructions for Form 8938. Normal civil and criminal penalties under the Internal Revenue Code could apply when Specified Individuals who meet the FATCA reporting threshold fail to comply with FATCA requirements.
This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.
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