Americans now required to disclose all foreign financial assets

The Foreign Account Tax Compliance Act (FATCA)

A little known new law was enacted for the year 2011 that requires, that once certain minimum amounts are exceeded, any specified person that holds any interest in a specified foreign financial asset during the taxable year to attach a statement to that person’s U.S. tax return and report information that identifies the value of those specified foreign financial assets in which the individual holds an interest. Form 8938.

Specified foreign financial assets include financial accounts maintained by foreign financial institutions, as well as certain other financial assets or instruments. An asset or instrument may be a specified foreign financial asset even if the asset or instrument does not have a positive value.

A specified foreign financial asset is (i) any financial account maintained by a foreign financial institution; (ii) any stock or security issued by any person other than a United States person; (iii) any financial instrument or contract held for investment that has an issuer or counterparty that is not a United States person; and (iv) any interest in a foreign entity.

A specified person is defined as a specified individual who is a U.S. citizen, a resident alien or a nonresident who elects to be taxed as a U.S. resident filing Form 1040; and U.S. entities required to file an annual tax returns such as a 1041 (Trust and Estate), 1120 (U.S. Corporation), 1120-S and 1065 (Partnership).

A specified person that is the owner of an entity disregarded as an entity separate from its owner is treated as having an interest in any specified foreign financial assets held by the disregarded entity. In addition, a specified person that is treated as the owner of a trust or estate or any portion of a trust under certain sections of the Internal Revenue Code is treated as if that person holds an interest in any specified foreign financial assets held by the trust or estate or by the portion of the trust or estate that the specified person owns. READ FULL ARTICLE BY RICHARD S. LEHMAN