Tuesday, September 13, 2011

Son of FBAR (Form 8938)

The IRS has really twisted itself into a knot with the new 8938 form, in which you will be required to report extremely detailed information about every financial asset that you own overseas (if you have more than $50,000 in financial assets in total).

According to the bill passed by Congress, you will be required to provide this information as of the 2010 tax year. Unfortunately, the IRS has been slow in creating this form and it is still in the draft stage.

How does the IRS solve the problem that it has created by not providing the form in time? Why, but dumping the problem on you.

In June 2011, the IRS released this wonderful bulletin, which said that it was suspending the requirements to file the form 8938 due to the fact that this form does not yet exist. However, it added this wonderful suffix:

Further, after the release of Form 8938 or the revised Form 8621, individuals and PFIC shareholders for which the filing of Form 8938 or 8621 is suspended by Notice 2011-55 for a tax year will have to attach Form 8938, Form 8621, or both, if required, for the suspended tax year to the next income tax or information return required to be filed with the IRS.

Notice 2011-55 clarifies that the statute of limitation on assessment of tax with respect to periods for which reporting is required under sections 6038D or 1298(f) will not expire before three years after the date on which the IRS receives Forms 8938 or 8621 for the tax year. However, a Form 8938 or 8621 filed for a suspended tax year with a timely filed income tax or information return (taking into account extensions) as required by Notice 2011-55 will be treated as having been filed on the date that the income tax or information return for the suspended tax year was filed.

What does this mean in English? What they want you to do is file the 2010 form with your 2011 return (or whatever year after they finish their form). If you don’t, then they claim they can say that you filed the form 8939 late (and assess penalties, etc), even though it did not exist at the time when you were supposed to file your return.

1 comment:

Pueblo girl said...

Why, they seem to have been taking lessons from Spanish Bureaucracy!