Tuesday, July 05, 2011

NEW FOREIGN FINANCIAL ACCOUNTING REPORTING ONE STEP CLOSER

For tax years beginning after March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act) provides that individuals with an interest in a “specified foreign financial asset” during the tax year must attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than $50,000. This reporting is in addition to similar reporting required on the annual FBAR form.

The IRS has now released a revised draft Form 8938, “Statement of Specified Foreign Financial Assets,” for public comment and review. This is the form that will be used for the HIRE Act reporting. Interestingly, the draft requires the taxpayer to list out the various income items from reported foreign financial assets and indicate where they are reported on the taxpayer’s income tax return (see excerpt below):

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The actual reporting is not yet required. In Notice 2011-55the IRS suspended the reporting requirements until it releases a final Form 8938. Once the final form is released, taxpayers will still need to report for the period required by the new law, but not until they file their next income return that is due. The Notice also advises that the Code Section 6501(c)(8) limitations period for tax assessments for periods for which reporting is required will not expire before three years after the date on which the IRS receives Form 8938.

Link to Draft Form 8938

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