New reporting for specified foreign financial assets.

• Author: Chambers, Valrie

Effective for tax years starting after March 18, 2010, new Sec. 6038D, added by the Foreign Account Tax Compliance Act (FATCA) provisions of the Hiring Incentives to Restore Employment Act of 2010, PL. 111-147, requires individual taxpayers to report any interest in "specified foreign financial assets" if the value of these assets in aggregate exceeds an applicable threshold amount. The amount of the threshold varies depending on the taxpayer's filing status and where the taxpayer lives. This reporting is required even if the assets do not generate gains or other investment income during the reporting period. In Notice 2011-55, the IRS suspended the reporting requirement until Form 8938, Statement of Specified Foreign Financial Assets, is finalized with appropriate instructions.

This form will not replace Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), but is in addition to it. Form 8938 will be attached to the annual tax return, which, according to the draft instructions, includes Forms 1040, U.S. Individual Income Tax Return; 1120, U.S. Corporate Income Tax Return; 1065, U.S. Return of Partnership Income; 1041,U.S. Income Tax Return for Estates and Trusts; 1120-F, U.S. Income Tax Return of a Foreign Corporation; 1120S, U.S. Income Tax Return for an S Corporation; and 1040NR, U.S. Nonresident Alien Income Tax Return.

The IRS released a draft of Form 8938 on June 21, 2011, and its instructions in draft form on September 28, 2011. As of this writing, neither has been released in final form, but the IRS is expected to do so in time for the 2012 filing season for 2011 individual tax filings.

Preparers are advised to become familiar with the filing requirements and to educate their clients on information required to prepare Form 8938. Some taxpayers will be relieved of filing responsibilities if they already file Forms 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts; Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner; Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations; Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund; Form 8865, Return of U.S. Persons with Respect to Certain Foreign Partnerships; or Form 8891, U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans. Therefore, preparers need to review when...