FORM 8938 - Expansion Of International Tax Reporting Requirements

The HIRE Act of 2010 enacted Section 6038D as part of the Foreign Account Tax Compliance Act. Drafts of the Form 8938 were issued by the IRS last year, and temporary and proposed regulations were issued late in the year. This Tax Bulletin summarizes the requirements of Section 6038D and the recent regulations as well as the Form. The Form is applicable for tax years beginning after March 18, 2010, which for most individuals will be the 2011 tax year. Note that Form 8938 is a tax form to be filed with an individual's U.S. income tax return; there are overlaps between the information to be reported on Form 8938 and Form 90-22.1, which is a Treasury Department form. Form 8938 does not replace or supplant Form 90-22.1, and individuals may now be required to file both forms. Recall that the Form 90-22.1 is filed with the Treasury Department on or before June 30 with respect to the preceding taxable year, while Form 8938 is filed with the IRS along with the individual's income tax return. Specified Foreign Financial Assets: Section 6038D requires an individual who holds any interest in a specified foreign financial asset during the taxable year to report certain information to the IRS if the aggregate interests exceed $50,000. For these purposes, a specified foreign financial asset includes a finance account maintained by a foreign financial institution, or, if not held at a financial institution, any stock or security issued by a foreign person, a financial instrument or contract that has a foreign issuer or counterpart, or an interest in any foreign entity where such instrument is held for investment. A financial instrument or contract includes interest and currency swaps, other swap contracts, options and other derivative contracts. Gold held in a safety deposit box, artworks, interests in a social security, social insurance or other similar program, and real estate do not constitute specified foreign financial assets. However, gold held by a custodian, interests in foreign trusts, foreign estates, foreign pension plans and foreign deferred compensation plans do constitute a specified foreign financial asset. Note that for purposes of Section 6038D and reporting on Form 8938, a U.S. branch of a foreign financial institution is not considered to be a foreign financial institution and thus assets held at the US branch need not be reported on Form 8938. Who Must File: Section 6038D applies to U.S. citizens, a person who is a resident alien at any...