Form 8938

These additional foreign financial assets are reported on Form 8938, a “Statement of Specified Foreign Financial Assets,” as part of the annual income tax return. Individuals' holding such foreign assets are required to report these holdings in their tax return using ITR-2 or ITR-3, whichever is applicable. Individuals are required to provide exhaustive details of the foreign assets held by them in the Schedule FA of the ITR form. Reporting of such foreign assets is to be done on the basis of the foreign assets acquired during the relevant accounting period of the foreign country. The finance ministry has issued a clarification on how to fill income tax returns for FY for resident Indians holding foreign assets.

Like FinCEN form 114, there are reporting exemptions, but they differ from those of form 114. You do not have to report an account held in a foreign branch of a U.S. bank. what is the de minimis safe harbor election Domestic mutual funds that invest in foreign stocks or securities or private equity funds are exempt. If held directly, personal property, such as jewelry and art, real estate, currency, and precious metals held abroad are all exempt. In addition, there are different monetary penalties that may apply if an individual fails to timely submit a required information reporting form related to foreign assets.

To fully understand the problem, it is necessary to understand what the reporting requirements for foreign assets are. You must report the maximum value of the foreign financial assets or financial accounts with foreign financial institutions, and certain other foreign non-account investment assets. The assets are reported in U.S. dollars using the end of the taxable year exchange rates.

Such individuals were facing problems in reporting foreign assets in the ITR wherever the financial year in India differed from that of the country in which the asset is held. The Central Board of Direct Taxes has issued a clarification dated August 27 regarding the above. In the circular the CBDT has clarified that only foreign assets acquired as per the relevant accounting period of the foreign country have to be reported while filing income tax returns for the financial year . Part III of Schedule B requires the taxpayer to check a box to report an interest in or signature authority over any financial account located in a foreign country; a segregated foreign retirement account arguably triggers this reporting requirement.

The monetary thresholds that must be met before an individual is required to submit one of these forms differ depending upon the form and, in certain cases, the individual’s status. For example, the obligation to file an FBAR is triggered when an individual has foreign bank accounts with an aggregate high balance of $10,000 at any point during the tax year. The obligation to file Form 8938, however, depends on the filing status of the individual and whether the individual resides in the United States or abroad. Within this range are additional reporting thresholds for single taxpayers residing abroad and married taxpayers residing in the United States. Finally, Form 3520 has different reporting triggers depending on the nature of the foreign asset.

Under the law, U.S. citizens, resident aliens, and certain nonresident aliens are required to report worldwide income from all sources including foreign bank and financial accounts. Required reporters must pay taxes on income from these accounts at their individual tax rates. The IRS recognizes that there are many legitimate reasons for U.S. taxpayers to have offshore accounts such as convenience, investing, and to facilitate international banking transactions. However, U.S. taxpayers are prohibited under law from using offshore accounts, including foreign banks, security accounts, and t