NEW REPORTING REQUIREMENTS FOR FOREIGN INVESTMENTS
If you own foreign investments, you may have an additional federal tax filing requirement this year.
Form 8938, “Statement of Specified Foreign Financial Assets,” is due April 17, 2012, and is filed as part of your individual tax return. You’ll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements.
What are the reporting requirements? They vary depending on where you live and your filing status. For example, say you’re married and live in the United States, and you’ll file a joint tax return for 2011. You’ll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2011 is more than $100,000, or if the value exceeds $150,000 at any time during the year.
Tip: In some cases, you may also need to file Form 8938 for tax year 2010.
Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies.
You’ve probably noticed the reporting requirements are similar to the “Report of Foreign Bank and Financial Accounts” (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you’ll still need to complete by June 30.
Penalties for failure to file Form 8938 start at $10,000. We urge you to contact us so we can help you evaluate your filing requirements for foreign investments.
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Tax time is the right time for a financial review
Now is an ideal time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for your financial well-being?
The following suggestions will get you started on your financial review:
* Hold a discussion with your family. Spouses and children need to share and prioritize their financial aspirations.
* Write down your financial goals. How much money will you need to meet each goal? When will you need the money, and how will you get it?
* Do a net worth statement (a list of your assets and debts), and compare it to last year’s statement. Are you gaining or losing ground?
* With your goals (and the effects of inflation) in mind, review the performance of your investments.
* Take steps to protect what you already have. Goals may become instantly unobtainable if you lose your present assets or your income potential.
* Do you have adequate disability insurance coverage to replace take-home pay if you become incapacitated?
* Do you have the proper amount of life insurance if you or your spouse should die?
* Do you have replacement value property insurance on your home?
* Do you have adequate insurance for calamities such as automobile accidents or lawsuits?
* Make sure that you need all of the insurance that you have. Do not duplicate employer-provided coverage. Review your coverage annually; do not just automatically renew policies.
* Review your will and your estate plan. Did your situation change during 2011 (marriage, divorce, births, deaths, move to another state, for example)? This year, the top estate tax rate is 35% with a $5,120,000 exemption. Make appropriate changes to your will and estate plan.
* Review your credit use. Keep your credit card bills current. If you’re finding that hard to do, it’s probably time to cut up some of those credit cards and get your debt under control.
* Organize your records. If you had trouble assembling data for your financial review, you need a better system. Set one up.
For help with any aspect of your review, call us. We’re here to assist you in any way we can.