In its continuing efforts to prevent foreign income tax evasion by U.S. taxpayers, the IRS has implemented a new reporting measure for offshore accounts. IRS form 8938, Statement of Specified Foreign Assets, requires details of any foreign financial asset (account or individual financial asset) that exceeds these minimum thresholds:
- Single Individual: $50,000 on the last day of the year or $75,000 any time during the year.
- Married Couple: $100,000 on the last day of the year or $150,000 any time during the year.
Effective for tax year 2011 reporting, taxpayers with foreign financial assets valued over these limits will be required to file Form 8938 annually. Note that Puerto Rico and other U.S. possessions are considered “foreign” for this purpose. Also note that the regulations specifically state that the fact that foreign law makes it illegal to file this form is not reasonable cause for not filing.
To comply, taxpayers must trace foreign asset income, deductions and credits from Form 8938 to where the same are reported on the tax return. As it did with Switzerland-based UBS AG, the IRS is actively working with a number of major banking institutions to secure the names of depositors who hold offshore accounts.
One means for reducing a taxpayer’s exposure to criminal prosecution is through the IRS’s Voluntary Disclosure (VD) program. However, any VD procedure must be initiated before the IRS has begun civil or criminal investigations, and before it has received specific information about the taxpayer from a third-party.
Saville’s accounting professionals have extensive experience with the complex regulatory provisions governing the reporting of foreign assets and bank accounts. If you have any questions please feel free to contact one of our trusted advisors at 214-922-9727.