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This week, the IRS published temporary regulations in the Federal Register, implementing the provisions of the 2010 HIRE Act (aka FATCA) that require the annual reporting of foreign financial assets by U.S. citizens and residents. The reporting requirement is effective for taxable years ending after date of publication (i.e., for 2011 calendar year returns) and may be satisfied by attaching a completed Form 8938 to the Form 1040 or 1040NR. The Form 8938 was issued in draft form earlier this year and can be seen here. Now that the regulations are out, the IRS should be finalizing it.
Reporting is required if an individual U.S. taxpayer had "specified foreign financial assets" during the taxable year that had a value of: (1) more than $50,000 on the last day of the taxable year, or (2) more than $75,000 at any time during the taxable year. These amounts are doubled for joint returns, and there are higher limits for individual living outside the U.S.
Because these new reporting requirements parallel those of the FBAR form, there had been some hope that the reporting under both statutes could be combined, but the regulations confirm the IRS position that these are separate requirements and that taxpayers must file both forms.
I believe that this Form 8938 (and the FBAR form) will increase the information required to be gathered by a CPA, and thus the tax preparation fees for those individuals with significant foreign assets may increase substantially..
Note that the taxpayer penalty for noncompliance is $10,000 per return.
Please be sure to tell your tax preparer if you have any foreign financial assets and provide your tax preparer for all relevant information in order to complete the required IRS forms.
As always, be careful out there.