Before quickly answering no, consider the following requirements and penalties. The dollar penalties for not reporting are very significant and can go as far as being criminal. The following items are not meant to be all inclusive.
The first item is the Form TD F 90-22.1 “Report of Foreign Bank and Financial Accounts”. This form is used to report a financial interest in or signature authority over a foreign financial account. A financial account not only encompasses checking and savings accounts at banks and certificates of deposit but also includes an insurance policy with cash value, an annuity with cash value, shares in a mutual fund or similar pooled fund. Foreign means the account is located outside the US and financial interest includes owning the account outright or having signature authority over the account. The US person responsible for filing this report is the actual individual, his agent, or trustee, a corporation in which the US person owns more than 50%, a partnership owned more than 50%, a trust in which the US person has more than 50% beneficial interest, and any other entity in which 50% or more interest is owned. The US person can be an individual, a corporation, an LLC, a partnership, or any entity. So, the shareholder of a US corporation which has a controlling interest in a foreign corporation could have a reporting requirement. The US Corporation would definitely have a reporting requirement. It can get very convoluted. The report is due on June 30 of the year following and the reporting threshold is if a business’ financial interest in foreign bank accounts exceed $10,000 in the aggregate at any time in the reporting year. The penalties for not filing this report are $10,000 per year for a non-willful act, $100,000 a year or half of the account for a willful act and willful violations may also be subject to criminal penalties. This report is required by the Department of the Treasury.
Since the TD report was required by the Department of the Treasury, the Internal Revenue Service really didn’t have jurisdiction over these forms and reporting requirements. So starting this year, 2011, the Internal Revenue Code now requires an additional form to be filed with the annual return to report ownership of foreign financial assets. This new form is form 8938 “Statement of Specified Foreign Financial Assets”. Individuals and entities must file this report with the filing of their annual tax return. This form would be filed by a US citizen, a resident alien, or a nonresident alien electing to be treated as a resident alien. Basically the reporting threshold is $50,000 for a single person and $100,000 for married filing jointly. Guidelines have not yet been promulgated for entities. Foreign financial assets for this purpose are assets held outside the country which are financial accounts maintained by a foreign financial institution, stock or securities issued by someone that is not a US person, any interest in a foreign entity, and any financial instrument or contract that has an issuer someone who is not a US person. Also, included in this list of foreign financial assets is an interest in a foreign estate, foreign pension plan, and foreign deferred compensation plan. The penalty for not filing this form is $10,000 per month until it is filed with a maximum of $50,000.
The IRS states that individuals are not required to do duplicative reporting so if an individual reports any foreign financial assets on other forms such as Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, or Form 5471 Information Return of US Persons With Respect to Certain Foreign Corporations, or Form 8865 Return of US Persons With Respect to Certain Foreign Partnerships, and others, they can simply state that on the 8938 and not duplicate the reporting information.
Other forms of interest are Form 926 Return by a US Transferor of Property to a Foreign Corporation and Form 5472 Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in a US Trade or Business.
If an individual has any dealings directly or indirectly with foreign assets or entities, it is imperative to work with a CPA and determine what forms need to be prepared. The penalties for non-filing are significant and should not be ignored.
