Thefollowing report explains one of the major reasons more and more Americans aremoving offshore and applying for and obtaining citizenships in foreigncountries. I am not sure if giving up mycitizenship is something I want to do however, it is more than clear to me,that moving offshore is not only a wise move, but a profitable one. You read and let us know what you think. You can visit the website: “Forgot to Savefor Retirement” and click on “44 ThingsYou Should Know Before Moving or Investing Offshore” (left hand side) also get additional free reports to help youdecide your next move.
SpecialReport ------------------------Taxes – Form 8938 ----- Off Shore Assets
Tax seasonis over, but many U.S. taxpayers remain confused about the new IRS Form8938...including many tax professionals, it seems, given the number of e-mailsI'm getting from readers asking questions to make sure their tax preparerscompleted their forms correctly.
This newform is a catch-all intended to capture information about offshore financialassets that aren't required to be reported on any other IRS form. If you ownsome offshore entity that requires you to complete a related form (5471 for anoffshore corporation or 3520 or 3520-A for an offshore trust, for example),you're already reporting the existence of the asset and don't have to file aForm 8938 for it...if that's the only offshore asset you hold. If you meet therequirements for the form and have additional assets that aren't already beingreported elsewhere...then, yes, you need the new 8938.
Start bydetermining whether you meet the requirements for Form 8938 overall. This meansunderstanding the rules and making some calculations.
First isthe fixed number threshold. For those residing in the United States, thatnumber is US$50,000 of Foreign Financial Assets (FFA) on the last day of thetax year or US$75,000 of Foreign Financial Assets at any point during the taxyear. Those figures are for people filing single, including married peoplefiling separately. The figures double for people filing jointly.
If youdon't reside in the United States, then the numbers jump to US$200,000 of FFAon the last day of the tax year or US$300,000 at any point during the year.Again, the figures double for people filing jointly.
While theminimum threshold for filing is higher than that for the FBAR form forreporting foreign bank accounts, foreign bank accounts are included in thedefinition of an FFA. Therefore, even if you don't qualify for the FBAR becauseyou have, say, one bank account overseas with only US$8,000 in it (thethreshold for reporting, remember, is an account with US$10,000 or more), youwould be required to report that bank account on Form 8938 if you meet therequirements for the new form overall.
FFAs alsoinclude stock certificates that you hold directly for foreign corporations evenif the corporation doesn't qualify as a U.S.-controlled foreign corporation(USCFC). This could be stocks of a Canadian junior mining stock you purchaseddirectly from the company that now sit in a drawer in your home office. Thisexample is critical as it's not uncommon to have invested in stocks in thismanner and forgotten about the certificates sitting in a file drawer somewhere.A friend whose mother died recently found old certificates for a foreign stockthat his mom had bought years before and hidden in her bedroom. No one elseknew they existed.
Thecatchall part of the definition for an FFA is "Any financial instrument orcontract that has an issuer or counterparty that is not a U.S. person."This definition would include, for example, an offshore life insurance policythat has a cash value. It would not include physical assets held in your ownname...such as real estate and metals if you hold the physical metal ratherthan a certificate.
Debatecontinues about whether physical metal held by a third party qualifies as anFFA. If you have a contract with a third party to store the metal, it could beconsidered to fall under the catchall definition. However, physical gold isclearly not a financial instrument, so most experts agree that physical metalsneed not be reported on Form 8938.
Realestate is much more black and white. It is not reportable...as long as you holdthe property in your individual name. If you hold it in an entity, then theshares of the entity qualify as an FFA and do need to be reported. The realestate then would be disclosed on the forms for the entity.
While theabove explanations are as clear as I can make them, they probably only bring upmore questions. With so much uncertainty as to what should be included on Form8938 and so much worry (thanks to IRS fear-mongering tactics) over the consequencesof not reporting something that is deemed reportable, some taxpayers are optingsimply to report any and all assets they hold outside the United States. Thatmay seem like overkill...and repulsive if you retain any expectations ofprivacy in the United States.
I'dagree...except that I've already given up on any delusion that anythingresembling personal privacy remains possible in the current climate in theStates. Further, I believe it will be only a short time before that will be therequirement anyway--to report any and all offshore assets, in anticipation ofthe imposition of a wealth tax.
With theU.S. government drowning in debt, many believe a wealth tax similar to the onesin France, Colombia, and elsewhere (including, at one time, in the state ofFlorida) is just around the corner. I count myself among them.
Meanwhile,remember: Failure to include even one required disclosure on Form 8938 canresult in a fine of as much as US$10,000 to US$50,000.
Lief Simon
--------------------------------SpecialReport end ----------------
You can view Form 8938 here: http://www.irs.gov/pub/irs-pdf/f8938.pdf for those who are actively involved in theRV of the Dinar, this hits right at your front door. The penalty for getting this wrong, aresteep. For help with un-filed taxes click here. Click here to get more information on Moving Offshore
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