The draft instructions for the new Son of FBAR (Form 8938) were released today. (Here is a link to my discussion of the form itself.) Here are some highlights from a first skimming of the instructions:
- For unmarried taxpayers living in the United States, the new form must be completed if you have either more than $50,000 in foreign financial accounts on the last day of your tax year (usually December 31st) or if you had more than $100,000 at any time during the tax year. If you are married filing jointly, the amounts double (to $100,000/$200,000).
- For unmarried taxpayers living outside of the United States who are either bona fide residents of a foreign country(ies) or passes the Physical Presence Test (Form 2555, the Foreign Earned Income Exclusion), you must file the form if you have more than $200,000 on the last day of the tax year or more than $400,000 at any time during the tax year. If you are married filing jointly, the numbers increase to $400,000/$600,000.
As for the types of accounts and assets that are reportable:
- Any financial account maintained by a foreign financial institution;
- Other foreign financial assets, held for investment but not maintained by a financial institution, including stocks not issued by a US person, interests in foreign entities, and various financial instruments issued by non-US persons.
- A foreign financial institution is a non-US financial institution that is a bank (or similar entity), hold financial assets for others, and is engaged in investing, holding partnership interests, or other financial roles.
- Foreign mutual funds, foreign hedge funds, and foreign private equity funds are covered.
- Online gambling accounts do not appear to be covered.
There is a transitional rule available for taxpayers who would have had to file this form in 2011 (generally, business entities filing on a fiscal year); they can file in 2012 without penalty.
The instructions are 11 pages long, and I don’t have time to delve into all of them at this point. Suffice to say that if you are covered by the new Son of FBAR, your tax return just became far more complicated and you will need to talk to your tax professional about this issue.