Alert: Foreign Financial Assets - New 2011 Tax Form Required

Remember those shares of stock in an Italian company that your grandmother left you? Well, if those shares, combined with any other foreign financial assets,* have an aggregate value of more than $50,000, you may have to file a new tax form in 2011.

As part of the tax law change in 2010, U.S. taxpayers will be required to file new Form 8938, “Statement of Specified Foreign Financial Assets” with their 2011 individual income tax return under under the following general conditions:

1. You have a specified foreign financial asset such as:
1. Any financial account maintained in a foreign financial institution (unless the institution is U.S. based).
2. Any interest in a foreign entity (corporation, partnership, etc.).
3. Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.
2. The aggregate value of the foreign financial assets is more than the reporting thresholds as follows:
1. Unmarried taxpayers living in the U.S. , total value >$50,000 on the last day of the year or >$75,000 at any time during the tax year.
2. Married taxpayers filing a joint return and residing in the U.S., total value >$100,000 on the last day of the year or >$150,000 at any time during the tax year.

Differing thresholds apply to taxpayers living abroad. Click here for greater detail from the IRS related to who needs to file Form 8938.

Severe penalties may apply for failure to file Form 8938. Contact a member of Decosimo's tax team for more information.

*The IRS definition of a specified foreign financial asset is:

• Any financial account maintained by a foreign financial institution, except as indicated above
• Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
  • Stock or securities issued by someone other than a U.S. person
  • Any interest in a foreign entity, and 
  • Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.