«

»

Mar 01

IRS Imposes Additional Burden on Asian Indians with Form 8938

With effect from 2012, the IRS has introduced ‘Form 8938 – Statement of Specified Foreign Financial Assets’ to be filed along with the income tax return. That is, all those filing their tax returns of 2011 will have to include Form 8938, if applicable to them. This form, which has already earned synonyms like ‘Son of FBAR’ and ‘FBAR Turbo,’ will be in addition to the already existing requirement of Foreign Bank and Financial Accounts Report (FBAR) that must be filed by June 30th each year.

The IRS is tracking foreign accounts in all countries. Under the new riles, one has to report all your share holdings, mutual fund holdings, ULIP and insurance policy holdings, pension plans and bank balances in India.

Specified foreign financial assets do not include physical assets such as gold and real estate. However, if gold is held in the form of ETFs, it would be included as specified foreign financial asset.

The reporting thresholds that apply are as follows: – Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year – Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year – Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. – Taxpayers living abroad: You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year or you are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

What is the due date for filing Form 8938? Form 8938 must be filed along with your income tax return. For US tax year 2011, the due date is April 17th 2012.

Form 8938 is in addition to FBAR
In recent years, the IRS has increased its focus on tracking offshore accounts for possible tax evasion. This new Form 8938 is just one more measure in that direction. In short, today, if you are a US resident or US citizen with bank and financial accounts in countries outside the US, you will have several reports to file. Your US tax return, 1040, itself has questions about your foreign financial interests in Schedule B. Then you have this new Form 8938 that must be filed along with your tax return. And finally you have the FBAR that must be filed by June 30th each year for the previous tax year.

While Form 8938 itself is not very complicated, the filing process might be cumbersome. For instance, while reporting share holdings in Indian companies in Part II of form 8938, you would need to list each company’s holding separately giving details of not just the shareholding but address of the company, dividends received and where you reported the income on your 1040. Consult a professional to make sure you don’t leave out any important details.

Source: GOPIO News Letter

See detailed article in Times of India at http://timesofindia.indiatimes.com/nri/us-canada-news/New-IRS-form-affecting-Indian-Americans/articleshow/11915264.cms

Leave a Reply

Your email address will not be published. Required fields are marked *