There has been a new law enacted by the IRS that is putting a heavy burden on American’s living abroad.
If you are an American living abroad, whether you are a citizen or a green card holder, you are to file your tax form on April 15th. A new IRS ruling results from a FATCA law that also require you to use Form 8938, where you will list down all your foreign stocks, bonds, bank deposits, and other financial assets with your 1040. You need to file this form together with FBAR form that you will send directly to the Department of Treasury.
This law is not only a duplication of the FBAR but is also a very onerous law that will not only complicate filing of your income taxes but will also infringe on your privilege to make investments abroad. Its effect is very far-ranging and could even cause a serious problem to the American economy and the international financial system.
Take note that Form 8938 is a more detailed and complicated form to fill out than the FBAR form. But it only requires you to list down your own financial assets and not those where you only have authority to sign for but don’t have any financial interest in, unlike what FBAR requires.
The upper limit of the foreign asset that you will report will depend if you are a resident of the US or a legitimate overseas resident. It is also dependent on whether you are filing a joint return as a married couple or you and your spouse are filing separate reports.
The law that requires you to file Form 8938 is the FATCA or the Foreign Account Tax Compliance. This new law also compels all international financial institutions such as banks pension funds, brokers, trusts, insurance companies, mutual funds and hedge funds to give the IRS a full report of all your financial assets if you are a client of these institutions and you qualify as a US person. This law will take effect on 1 January 2014 and the IRS has now a way of cross checking your Form 8938 and the reports of the financial institutions.
This FATCA law is very injurious to US citizens like you since it will mean closing your right to use opportunities for foreign investment and international banks in addition to more paper work, that of filling out and filing form 8938.
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