HIRE Act of 2010 enacted Code Section 6038D that provided that individuals as well as certain domestic entities with interest in “specified foreign financial assets” must attach a disclosure statement to their tax returns each year if the aggregate value of all such assets is greater than $50,000. Specified financial assets include depository or custodial accounts at foreign financial institutions, and to the extent not held in an account at a financial institution, (a)
stocks or securities issued by foreign persons, (b) any other financial instrument or contract held for investment that is issued by or has a counterparty that is not a U.S. person, and (c) any interest in a foreign entity.
IRS issued Notice 2011-55 wherein it suspended teh reporting requirements until it releases the final Form 8938 – the draft Form was released in June 2011.
IRS today released the draft instructions that include the following:
The Instructions provide that individuals satisfy the reporting requirements if they have specified foreign financial assets of more than $100,000 at any time during the year or if the total value of their specified foreign financial assets on the last day of the tax year is more than $50,000 for unmarried taxpayers living in U.S., $100,000 for married taxpayers filing a joint return and living in the U.S., and $50,000 for married taxpayers filing separate returns and living in the U.S.
The Instructions also provide the reporting threshold for taxpayers living abroad, i.e., taxpayers who are bona fide residents of a foreign country or countries for an uninterrupted period that includes the entire tax year, or are present in a foreign country or countries during at least 330 full days during any period of 12 consecutive months ending in the tax year (in short meet S. 911 conditions). They meet the reporting obligation if they are not filing a joint return and the value of their specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $400,000 at any time during the tax year.
The Instructions also reminds the taxpayers that filing Form 8938 does not relieve a taxpayer of the requirement to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if he or she is otherwise required to file Form TD F 90-22.1.