IRS New Foreign Requirements: Form 8938

The IRS has announced new foreign financial information filing requirements for all 2011 tax returns. The new Form 8938: Statement of Specified Foreign Financial Assets requires taxpayers to disclose identifying information of their foreign financial assets on their personal and business tax returns. 

According to regulations released by the IRS, the definition of a foreign financial asset is: 

1. Any stock or security issued by any person other than a United States person, or
2. Any financial instrument or contract held for investment that has an issuer or counter party that is not a United States person, or
3. Any interest in a foreign entity.

A taxpayer must file Form 8938 if they have an interest in one or more foreign financial assets and those assets have an aggregate fair market value exceeding $50,000 or more as of the last day of the year or $75,000 at any time during the year.

Information that needs to be reported on Form 8938 includes (but is not limited to): 

1. The name and address of the financial institution in which the account is maintained.
2. The account number.
3. The maximum value of each foreign financial asset.
4. The information necessary to identify the foreign financial interest, contract or instrument. 

It is also worth noting that even though Form 8938 may appear to duplicate information that may have already been reported on other tax return forms, taxpayers are still required to file the Form 8938 if they meet the filing criteria.

For further information, please consult with your tax preparer to determine if you or your business are required to file Form 8938 with your 2011 tax returns.  Please note that failure to file Form 8938 when there is a requirement to file may result in severe penalties.

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Andrew Wallin is a Certified Public Accountant at Nasif, Hicks, Harris & Co., LLP.  Andrew can be reached via phone at (805) 979-9539 or e-mail at awallin@nhhco.com.

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The material appearing in this communication is for informational purposes only and should not be construed as an opinion or legal, accounting, or tax advice provided by Nasif, Hicks, Harris & Co., LLP. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials have been prepared by professionals, the user should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented. Nasif, Hicks, Harris & Co., LLP assumes no obligations to provide notification of changes in tax laws or other factors that could affect the information provided. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. The user assumes all responsibility for the use of such information. Any written tax advice contained herein was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code or any taxing authority.

December is the Best Month to Save on Taxes

In the tax preparer world December is known as tax planning month. As a CPA this is my favorite month because it is the month I can help save the most money for my clients.

I love my job most when I effectively use the tax code to my client’s advantage. Tax planning allows clients to save money.

Here are great tax planning strategies I employ to help my clients:

Charitable Giving

The holidays are a great time to give back to your favorite charity by making a donation of old clothing or miscellaneous personal property. Charitable donations may increase a taxpayer’s itemized deductions.

Gifts to Loved Ones

In 2011 you can gift up to $13,000 per person without filing gift tax returns or paying gift taxes. The lifetime gift and estate exclusion is currently $5 million. The lifetime exclusion amount may change at the end of 2012 as the current tax laws are set to expire on December 31, 2012.

Roth IRA Conversions

In 2010 and 2011 you can convert an unlimited amount from your 401(k), SEP IRA, Traditional IRA and other retirement accounts into a Roth 401(k) or IRA. You have to pay tax on the amount converted but if you have a low income year or unused itemized deductions, a Roth conversion may be a great way to let your retirement funds grow income tax free.

Timing of California and Real Property Tax Payments

In general, state income and property taxes that are deductible as an itemized deduction. By working with your tax preparer you can determine if paying more of the taxes in the current year versus in the next year will save you money. For individuals that have fluctuating income this strategy is especially effective.

Update your Trust and Estate Planning Documents

Your trust and estate plan may be the most important item when you are planning for your heirs. December is a great time to meet with your estate planning attorney and accountant to update your plan documents for any changes that have occurred. Trusts are easy to forget when you do not need them, but are vital when you do.

If you do not have a an estate plan, we highly recommend you meet with a local estate planning attorney and accountant so your family does not encounter delays in settling your estate.

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Joe Bishop is a Certified Public Accountant at Nasif, Hicks, Harris and Co., LLP. Joe can be reached via phone at (805) 979-9383 or via email at JBishop@nhhco.com.

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The material appearing in this communication is for informational purposes only and should not be construed as an opinion or legal, accounting, or tax advice provided by Nasif, Hicks, Harris & Co., LLP. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials have been prepared by professionals, the user should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented. Nasif, Hicks, Harris & Co., LLP assumes no obligations to provide notification of changes in tax laws or other factors that could affect the information provided. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. The user assumes all responsibility for the use of such information. Any written tax advice contained herein was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code or any taxing authority.