The IRS is continuing its efforts to identify sources of offshore taxable income of U.S. taxpayers. This has lead to a new reporting requirement. Many U.S. taxpayers with foreign assets must now file IRS Form 8938 – Statement of Specified Foreign Financial Assets. This new requirement is applicable to the 2011 tax year, and must be filed with an individual’s annual federal tax return. The IRS has issued instructions for the new form.
This new requirement does not replace the annual FBAR report, which is due by June 30 of the applicable filing year.
Some, but not all, U.S. taxpayers are subject to the new requirement. For instance, it applies to married taxpayers filing a joint income tax return if the total value of your specified foreign financial assets is more than $100,000 on the last day of the year or more than $150,000 at any time during the tax year.
There are failure-to-file and accuracy-related penalities relating to Form 8938, and these penalties can be severe. It is therefore very important for anyone with funds in offshore accounts to have a tax preparer who is familiar with all of the applicable reporting requirements.