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1818 Society
Form 8938 and Other
Important Reporting Issues
Bob Len, CPA, CFP Wolf Group Capital Advisors
Dale Mason, CPA The Wolf Group
Grant Miller, The Wolf Group
The Wolf Group, PC • 4401 Fair Lakes Court, Suite 310, Fairfax, VA 22033 • Tel: (703) 502-9500
FATCA Overview
Designed to force U.S. citizens and residents
to report all foreign income
FATCA provisions add an entirely new Chapter
to the Internal Revenue Code
400 pages of regulations
FATCA Overview
IRS Agreement:
• Required of all worldwide foreign financial
institutions (“FFI”) and certain non-financial
institutions who receive any U.S. source
• 5 European Countries Joint Statement
• 30% withholding tax applied to any
“Withholdable Payment”
FATCA - Practical Implications
 Many foreign financial institutions have and will decide
to terminate U.S. clients’ accounts
 Strict enforcement of PFIC rules and cost of information
reporting will also cause U.S. persons to move financial
assets to the U.S.
 Self-reporting will be cross checked with institutional
(foreign government) reporting. Discrepancies will be
easy to identify.
Form TD F 90-22.1 and
Form 8938
The Wolf Group, PC • 4401 Fair Lakes Court, Suite 310, Fairfax, VA 22033 • Tel: (703) 502-9500
Foreign Bank Account
Reporting: Form TD F 90-22.1
 Who should file:
• U.S. citizens and residents
 Persons with financial interest in or signature authority over
foreign financial account(s)
 Aggregate value exceeding $10,000 at any time during the
 Deadline is June 30 of the following year
• (No extensions)
 Not filed with tax return
• Schedule B question
Foreign “Financial Account”
Bank, savings and checking accounts
Securities accounts such as mutual funds and
brokerage accounts
Even foreign annuity or insurance policy with a cash
surrender value
Not individual bonds, notes or stock certificates
Maximum Value
 Must file if the sum of all foreign financial accounts’ maximum
values during the year exceeds $10,000
• Look first at the maximum value of each account
• Then add all maximum values and compare to $10,000
• Odd result: $5,000 transferred between accounts is
 Convert foreign currencies at the 12/31 exchange rate
 Must use Treasury’s FMS rate if available
Joint Accounts
 Each U.S. person who owns part of a joint account that
exceeds $10,000 must report the account on an FBAR
 Each joint owner reports the full value of the account
 No joint FBARs except for MFJ husband and wife
• Not allowed if each spouse has separate accounts
Form TD F 90-22.1 Penalties
 Non-willful failure penalty
• $10,000
• May be waived due to “reasonable cause”
 Willful failure penalty
• Greater of $100,000 or 50% of account balance
 Criminal penalties
 6 year statute of limitations
IRS’ Offshore Voluntary
Disclosure Program
Partial amnesty program
FBAR and certain international tax reporting
Pay all taxes and interest for past 8 years
Accuracy or delinquency penalty
Waiver of penalties for informational forms
Penalty: 27.5% of the highest account balance
Penalty: 12.5% if unreported foreign account < $75K
 Currently no deadline; subject to change
New Specified Foreign Financial
Assets Report – Form 8938
Effective for individuals for 2011
Interest in “Specified Foreign Financial Assets” with
an aggregate value exceeding $50,000
Information statement attached to the individual's
U.S. income tax return
This reporting requirement is in addition to FBAR!
New Specified Foreign Financial
Assets Report – Form 8938
“Specified foreign financial asset”
• Any financial account maintained by a foreign
financial institution
• Any stock or security issued by a foreign person
• Any financial instrument/contract – foreign issuer
• Any interest in a foreign entity
Information statement - Maximum value of assets,
account numbers, names and addresses of foreign
financial institutions, etc.
Form 8938 Filing Thresholds
Single, living in the U.S.
Year-End Aggregate Value
of All Specified Foreign
Financial Assets Exceeds:
Highest Annual Balance
Single, living outside the
MFS, living in the U.S.
MFS, living outside the U.S.
MFJ, living in the U.S.
MFJ, living outside the U.S.
Jointly Owned Assets
 Joint Ownership – each specified person must report
• Spouse, MFJ – file a joint 8938; include asset value once
• Specified Individual Spouse, MFS – include ½ asset value to
determine threshold, but report full amount on 8938
• Non-Specified Individual Spouse, or Non-Spouse – each
joint owner includes entire value of asset
• Examples on page 3 of Form 8938 Instructions
Form 8938 Valuation
 Accounts: may generally rely on periodic statements
 Other assets: may rely on year-end value, don’t need
 Unless individual has reason to know the above does not
provide reasonable maximum value
 Foreign pension plan – year-end value
• If not known, value of distributions received during the year
• If no distributions received, value is zero
 Convert to USD at December 31 spot rate
 Must use Treasury’s FMS rate if available
Form 8938 Penalties
 $10,000 penalty for failing to file Form 8938
 Additional penalties following notification
 40% underpayment penalty
 Criminal penalties
 Reasonable cause exception
 Extended statute of limitations
FBAR vs. 8938
FBAR (TD F 90-22.1)
Form 8938
Who Must File
U.S. Persons
“Specified Persons”
What is Reported?
Foreign financial accounts
Signature Authority?
Filing Threshold
$50,000 - $600,000
Minimum Penalties
No minimum
Due Date
6/30, no extensions
4/15, plus extensions
Statute of Limitations
6 years from filing date
3 years from filing date
Form 8938: World Bank Pension
Subject to special valuation rules
Value of participant’s share of defined benefit plans
generally not ascertainable
Value equal to distributions received during the year
• Gross distribution reported on Form 1099-R
Example: Facts
Single individual living in the U.S.
Retired from the World Bank
Receives an annual gross distribution of $75,000
Example: Sample 8938
Example: Sample 8938
Other Important International
Filing Requirements
Form 8621 – Passive Foreign Investment
Form 3520 – U.S. owner of a foreign trust
Form 5471 – U.S. owner of a foreign