Does your domestic entity have foreign assets which must be reported on the IRS Form 8938? The Foreign Account Tax Compliance Act or FATCA requires many US corporations, LLCs, trusts and partnerships which hold foreign investments or financial assets to disclose them on the form 8938. If a US trust is holding specific foreign investments or assets for the benefit of a any US taxpayer, and that taxpayer may elect to receive a distribution of interest or principle the trust will be required to file the IRS 8938. This is true if the accumulated total of all of these assets exceeds $75,000 at any point during the tax year, or if the aggregate value exceeds $50,000 on the last day of the year. Many US corporate entities, closely held companies and partnerships have sought the high returns of offshore passive income. This creates substantial tax-related complications as well as the requirement to disclose the assets.
There are many reasons shy your domestic entity may trigger reporting requirements for the IRS Form 8938. If your entity or trust generates any income, losses, gains, distributions or other credits or deductions from holding or disposing of an investment, account or asset you may be required to file the IRS Form 8938. Your entity or trust (or the beneficiary or grantor) are considered to have a financial interest if you are owner of record or title or have a beneficial interest or signatory control over the account, investment or asset.
The penalty for the failure to disclose these offshore assets or investments is $10,000 and an additional penalty of $10,000 for each 30 days of non-filing after the IRS provides notice of your failure to disclose the asset. The maximum penalty is $50,000 for continual failure to file as well as the original $10,000 penalty or $60,000 in total. Does your domestic entity have foreign assets or investments offshore? Have you been notified by the IRS of a failure to disclose offshore assets? Contact the integrated tax, legal, trust and accounting professionals at Allen Barron for a free consultation today at 866-631-3470.
