Washington, D.C. (December 15, 2011)
By Michael Cohn,
The Internal Revenue Service plans to release a new information reporting form that taxpayers will need to use next tax season to report on certain types of foreign financial assets for tax year 2011.
The new form, Form 8938 (Statement of Specified Foreign Financial Assets), will need to be filed by taxpayers with specific types and amounts of foreign financial assets or foreign accounts. The IRS said Wednesday it is important for taxpayers to determine whether they are subject to this new requirement because the law imposes significant penalties for failing to comply.
The new Form 8938 filing requirement was enacted in 2010 to improve tax compliance by U.S. taxpayers with offshore financial accounts. It was part of the Foreign Asset Tax Compliance Act, or FATCA, which was included in the HIRE Act of 2010. Individuals who may have to file Form 8938 are U.S. citizens and residents, nonresidents who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory.
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The FATCA provisions have been attracting controversy, as they impose new requirements on individuals and foreign financial institutions to report information to the IRS. U.S. citizens and dual citizens in Canada in particular were concerned about the possibility of heavy new penalties being levied by the IRS because of the new requirements, and last Friday, the IRS posted a new page on its Web site to clarify the tax responsibilities of U.S. citizens and dual citizens living abroad (see IRS Offers Some Relief for Expats and Dual Citizens).
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