The Foreign Account Tax Compliance Act, enacted in 2010, created new IRC Section 6038D and requires individuals to file a statement with their income tax returns to report interests in specified foreign financial assets if the aggregate value of those assets exceeds certain thresholds.
Temporary regulations implementing IRC 6038D have been issued. Under the regulations, specified individuals (U.S. citizens, residents and certain non-resident aliens) are required to complete and attach Form 8938, Statement of Specified Foreign Financial Assets, to their income tax returns. This is effective for tax years starting after March 18, 2010, which for most people will be their 2011 tax returns filed during the 2012 filing season.
In developing the regulations IRS considered the potential burden this new self-reporting requirement could have on affected taxpayers. To balance reporting burden and the need for compliance improvement, there are higher asset thresholds for married couples and those residing abroad. There are also exceptions that relieve taxpayers from reporting certain assets, and special rules for valuing assets.Read More