1) You have a “Specified Foreign Financial Asset” which exceeds the filing requirements
Financial Assets that are subject to this form are: A Financial Account maintained by a foreign institution and the following assets not held in an account with a foreign institution:
* Stock or security issued by a foreign person
* Financial instrument where the issuer is not a U.S. Person
* And any interest in a foreign entity
The filing requirements are married taxpayers filing jointly living in the United States if the value of the foreign assets was more than $100,000 on the last day of the year or more than $150,000 anytime during the year. The filing requirements for unmarried taxpayers are half of this amount, $50,000 and $75,000 respectively. The Form 8938 must be filed with your individual income tax return, Form 1040.
2) You don’t like paying IRS Penalties
The penalty for failure to file this form starts at $10,000 and is a maximum of $50,000. Either way, this is a lot of money.
3) The Filing of Form TD F 90-22.1, Report of Foreign Bank and Financial Account (“FBAR”) does not satisfy this new filing requirement
Certain taxpayers have a responsibility to file the so-called FBAR. This is required if there are foreign accounts in excess of $10,000. This form is filed with the Treasury Department and is due by June 30. It is not filed with the IRS. The filing of this form does not relieve taxpayers that are required to file the 8938 from filing. Note the requirement for the FBAR is in excess of $10,000 and the requirement for the 8938 is $50,000. Some foreign assets may be difficult to value. If additional time is needed to determine the correct fair market value, taxpayers should file an extension on Form 4868. A properly completed extension will allow an additional 6 months, until October 15 to file the return.
Is it possible they will do away with the filing of the FBAR in the future? Perhaps, it would certainly make sense. Much of information required on the FBAR is very similar to the information on the Form 8938. Just because it makes sense however, doesn’t mean they will do it.
ACTION ITEM: Taxpayers need to be aware of the new, expanded reporting requirements for foreign assets. Failure to comply with the additional disclosure requirements can be very expensive.
Thomas F. Scanlon, CPA, CFP®
Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
Hi,
I have not filed Form TD F 90-22.1 last few years.
I am married and filling jointly from 2008. We transferred US $ to our my spouse Indian account for our loan and family maintenance for our aged parents in India. Whenever the exchange rate is high we transferred the amount into our Indian account and sometimes it exists more than $10,000 a year but less than $50,000.
Do we need to file Form TD F 90-22.1 from 2008?
Do we need to file Form 8938 also?
Please advice us.
Thanks,
Chidam Alagar
Chidam,
Yes, TD F 90-22.1 is due if the account goes over $10,000 at any time during the year.
No, you do not need to file IRS Form 8938. This is due for a married couple filing a joint return if the value at December 31, was $100,000 or more or if the value ever exceeded $150,000.
I hope this helps.
Regards,
Tom