FATCA Update - Revised reporting for Form 8938

The IRS just released revised instructions for the Form 8938 that impact what and who is required to report certain foreign financial assets. The revised reporting generally only applies to tax years 2011 - 2014 and for tax years starting on or after 12/12/2014 it changes again. There are two changes, one for who is required to report and the second is for what is required to be reported - both of which are the result of the final regulations.

Individuals required to report. The final Code Sec. 6038D regulations changed the reporting rules for dual resident taxpayers. For this reason, the published 2014 instructions and the instructions for Form 8938 for prior years are modified.

Specifically, the following Form 8938 reporting rules, as more fully set forth in the final Code Sec. 6038D regulations, apply to a dual resident taxpayer (within the meaning of Reg. § 301.7701(b)-7(a)(1)) who determines his or her income tax liability for all or a portion of the taxable year as if he or she were a nonresident alien as provided by Reg. § 301.7701(b)-7.

(1) A specified individual, who computes his or her U.S. income tax liability as a nonresident alien on the last day of the taxable year, is not required to report specified foreign financial assets on Form 8938 for the portion of the individual's taxable year covered by Form 1040NR or Form 1040NR-EZ, if the individual complies with the filing requirements of Reg. § 301.7701(b)-7. These requirements include the requirement to timely file Form 1040NR or Form 1040NR-EZ and attach Form 8833 (Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)).

(2) A specified individual, who computes his or her U.S. income tax liability as a resident alien on the last day of the taxable year, is not required to report specified foreign financial assets on Form 8938 for the portion of the individual's taxable year reflected on the schedule to Form 1040 or Form 1040EZ that is required by Reg. § 1.6012-1(b)(2)(ii)(a), if the individual complies with all of the filing requirements of Reg. § 1.6012-1(b)(2)(ii)(a). These requirements include the requirement to timely file Form 1040 or Form 1040EZ and attach a properly completed Form 8833 to the schedule to such Form 1040 or Form 1040EZ.

Accounts excluded from the definition of a financial account under an applicable Model 1 or Model 2 IGA. Certain accounts are excluded from the definition of a financial account under an applicable Model 1 or Model 2 IGA.

For taxable years beginning on or before Dec. 12, 2014, if the jurisdiction in which a financial account is maintained has an IGA in effect, or is treated as having a Model 1 IGA or Model 2 IGA in effect, on or before the last day of the taxpayer's taxable year, retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in Reg. § 1.1471-5(b)(2)(i) that are excluded from the definition of financial account in such IGA, are not required to be reported on Form 8938.

For taxable years beginning after Dec. 12, 2014, the final Code Sec. 6038D regulations provide that, in addition to retirement and pension accounts and non-retirement savings accounts described in Reg. § 1.1471-5(b)(2)(i), any retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in Reg. § 1.1471-5(b)(2)(i) that are excluded from the definition of financial account in an applicable Model 1 IGA or Model 2 IGA, must be reported by the taxpayer on Form 8938. Thus, such accounts are subject to uniform reporting rules and must be reported without regard to whether the account is maintained in a jurisdiction with an IGA.

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