April 2013

Reporting Foreign Assets

The IRS has recently announced that it is obtaining information about U.S. taxpayers’ foreign financial accounts from non-U.S. banking institutions such as: 

  • UBS
  • Credit Suisse
  • HSBC
  • Basler Kantonalbank
  • Wegelin & Co.
  • Zuercher Kantonalbank
  • Julius Baer
  • Bank Leumi Le-Israel
  • Bank Hapoalim
  • Mizrahi-Tefahot Bank
  • Liechtensteinische Landesbank
  • Neue Zuercher Bank 

Additionally, the IRS is pursuing leads from other institutions which were not named.

Starting in 2014 the Foreign Account Tax Compliance Act (FATCA) requires non-U.S. business and institutions to provide information about their U.S. account holders and what was paid to them.   

Because of the changing information sharing climate we are reminding taxpayers to report their Foreign Financial Accounts and, when applicable, their designated foreign assets.
 
As previously communicated all U.S. citizens, U.S. entities and foreign nationals who are tax residents of the U.S. (i.e., “required filers”) that have a direct or indirect financial interest in any type of foreign financial account are required to report the accounts to the Treasury Department on the FBAR Form TD 90-22.1 when the $10,000 aggregate threshold has been exceeded.  Indirect financial interests in foreign accounts arise when there are chains of ownership.

Even if a U.S. individual filer is residing abroad the FBAR form must still be filed. Also, the Treasury Department must receive the 2012 FBARs by June 30, 2013. 

In addition, U.S. individual filers whose foreign assets exceed a defined threshold are required to include a new Form 8938 in their U.S. Form 1040 to report such assets.  This threshold varies based on the filing status of the U.S. taxpayer and whether the individual is living in or outside the United States. 

Foreign assets subject to reporting include the foreign financial accounts reported on FBARs, direct ownership interests in non-U.S. entities such as a foreign partnership or a foreign corporation, foreign pension plans and other foreign assets.

Note that the IRS can assess failure to file penalties which start at $10,000 if the required forms are not filed.  

If you have any questions about FBAR filings or completing the new Form 8938 please contact a ParenteBeard partner or

Mike Mathisen, Partner | 646.375.3825 | [email protected]
Jim Lawson, Principal | 215.557.2063 | [email protected]
Ellen Hickman, Director | 215.972.2528 | [email protected]
Karen Andersen, Manager | 856.330.8139 | [email protected]
Robert Arthur, Principal | 215.557.2285 | [email protected]
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