Phil Hodgen is an International Tax Attorney who has been mentioned occasionally by me and others. He has a blog that I always read, if and when he is posting. He has in the past offered OVDP/OVDI information and/or advice with a twist of sardonic humor which I enjoy. One thing Phil does occasionally, when he is traveling, is sends out an email called a Jell-o Shot. With his permission, I am posting his latest here. In it he discusses the form 8938 which is a current topic. As Petros says, the Isaac Brock Society maintains a non-endorsement policy of tax-professionals (see here). However, if you want to follow his blog as part of your personal education Drudgery, here is the link. There may be some archived information there that is of interest to you.
This is a non-travel Jell-O Shot. I’ll be on the road in March so you’ll get caffeine-soaked, jet-lagged rants then.A new tax form requires Americans to disclose assets they own outside the USA. This is Form 8938. Noncitizen-nonresident individuals are also at risk for filing this form.
- Figure out if this applies to you in 2011.
- Figure out how to make this not apply to you in the future.
FORM 8938The US government wants all Americans to reveal all assets owned outside the USA. I will spare you the editorial comments. Not content with Form TD F 90-22.1 (the dreaded FBAR), there is a new form in effect for this year that more or less asks the same questions: Form 8938.Form 8938 tells you to report your foreign financial assets. That is defined rather broadly, and I guarantee you the definition will expand in future years.The usual severe penalties apply for screwing this up.
What I’m seeingThere is a large set of our clients who are being hit by the requirement to file this form. They are not citizens of the United States. They don’t live here. Yet they are being forced to reveal all of their foreign financial assets to the U.S. government. Here are the ingredients for this sad result:
- With a certain amount of wealth (as low as US$ 50,000) abroad;
- Who become U.S. residents for tax purposes because they spend too much time in the United States; and
- Claim under an income tax treaty to be nonresidents of the United States for income tax purposes..Everything works well, except the treaty does not protect them from the requirement to file Form 8938.The painful details are on my blog, if you are looking for legal analysis and citations to the Internal Revenue Code and Treasury Regulations.
Next ActionIf this remotely sounds like you, duck and cover (YouTube) then call up your favorite international tax expert. And practice some preventive medicine so you don’t have to experience this joy in the future. The easiest way to do this? Don’t spend too many days in the USA.Phil