• Upcoming Filing Deadline for Reporting of Foreign Financial Assets
  • April 10, 2012
  • Law Firm: Faegre Baker Daniels - Minneapolis Office
  • United States taxpayers participating in foreign employee benefit plans should be aware of a new IRS filing requirement under the Foreign Account Tax Compliance Act ("FATCA"). This requirement is effective for the 2011 tax year, and taxpayers affected by FATCA must file an IRS Form 8938 ("Statement of Specified Foreign Financial Assets") by April 17, 2012.

    Individuals must file Form 8938 and pay the associated taxes if they are required to file a U.S. tax return and hold a certain amount of specified foreign financial assets. For this purpose, individuals are required to include an interest in a non-United States employee benefit plan, such as pension plans, equity compensation plans, deferred compensation plans or stock awards. Individuals living in the United States are only required to file Form 8938 if their total foreign financial assets meet one of the following:

    (a)    are $50,000 or more in the aggregate as of the last day of the tax year, or

    (b)   were valued at $75,000 or more at any point during the tax year.

    The thresholds listed above are adjusted both if the individual is filing jointly and if he or she lives outside of the United States.

    The penalties for failing to file Form 8938 are steep: individuals who fail to file are subject to fines up to $10,000 for a single failure and $50,000 for multiple failures. Similarly, individuals are liable for a 40% penalty on any underreported tax owed on their foreign financial assets.