Sunday, February 15, 2015

Reporting Changes For 2014 Individual Tax Returns - IRS Fact Sheet

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So Valentine's Day was here and left- that could only mean one thing - we are into the 3rd serious week of tax season! The Internal Revenue Service got out it's fact sheet about the changes in reporting requirements for individuals. I thought for all those self-preparers, this would be a good tool to look at and see if this is the year you want to make the leap & have your taxes examined by a tax professional, especially an Enrolled Agent! 

The ACA Act says that a taxpayer and each member of his family when filing his federal income tax return, must either 
  • Have qualifying health coverage for each month of the year; 
  • Qualify for an exemption;
  • Make an individual shared responsibility payment 
Some moderate-income taxpayers may also qualify for financial assistance to help cover the cost of health insurance purchased through the Health Insurance Marketplace. 

You would be categorized as one of the following:

A. Check the box- Simply check the box on the tax return that each member of your family had qualifying health coverage throughout the year. You can use a chart on to find out if your coverage counts as "qualifying coverage".

B. Exemption -  You may be eligible to claim an exemption from the requirement to have coverage. Eligible taxpayers need to complete the new IRS Form 8965, Health Coverage Exemptions, and attach it to their tax return. 

C. Individual shared responsibility payment: If you do not have qualifying coverage or an exemption for each month of the year, you will need to make an individual shared responsibility payment with your return for choosing not to purchase coverage.

D. Premium tax credit (PTC): If you bought coverage through the Health Insurance Marketplace, you should have received Form 1095-A, Health Insurance Marketplace Statement, from the Marketplace by early February. If you haven't received this yet- contact the Marketplace and not the IRS for that information. 

You will also need to reconcile your advance payments to the amount of your PTC on Form 8962 with the amount of your actual income.

  •  RENEWAL OF TAX BENEFITS: Benefits that had expired for 2013 and were renewed for 2014 are: 
                  # Deduction for state and local sales taxes claimed by taxpayers who itemize their deductions on schedule A. 

                 # Educator Expense Deduction claimed as an adjustment to your income on Form 1040 Line 23 by eligible teachers. 

                 #  Qualified Charitable Distributions by IRA owners age 70 1/2 or older.  

                 # Non-business Energy Credits claimed on Form 5695 

                 # Tuition & Fees Deduction claimed on Form 8917

Under the new rule, an IRA owner can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs he or she owns. 

The limit will apply by aggregating all of an individual's IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit.

While this rule only begins to apply in 2015, it could affect taxpayers' actions with respect to their IRAs and their 2014 returns. There is a 2015 transition rule that ignores some 2014 distributions.

If you have either one of the 2 popular Canadian Retirement plan, the Registered Retirement Savings Plans (RRSPs) or Registered Retirement Income Funds (RRIFs), you know that you had a special annual reporting requirement on the Form 8891. This requirement has now been eliminated. 

Please note that this does not change your reporting requirements under FATCA or on the Form 8938, if those thresholds applied to these Canadian retirement accounts.   

IRS Direct Pay, which debuted during last year's tax-filing season, allows individuals to pay their tax bills or make quarterly estimated tax payments, directly from checking or savings accounts without any fees or pre-registration. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Sunday, February 8, 2015

So Whats The New Buzz On Foreign Bank Accounts?

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When looking for a picture for this post, I came across the one above & remembered my college English Professor. She really loved the term, "Freudian Slip" for some reason! All I knew then was that Sigmund Freud was the father of psychoanalysis but I never quite understood how that related to a Business English class, unless that was the Professor's way of telling us we were driving her nuts! Now I know that the term, "Freudian Slip" is a "mistake in speech that shows what the speaker is truly thinking" or "to do what one is truly thinking about". 

No, this post is not about defining psychoanalytic terms, dare I say more interesting than tax stuff? Not quite, but this post is about the latest buzz from the Internal Revenue Service, about some situations US taxpayers having foreign accounts might be in & their compliance options. So here it goes!

I. You are a US taxpayer who has properly reported and paid tax on ALL worldwide taxable income. Oops! You did not know that with your account thresholds, you should have been filing FBARs in all those years as well. These accounts were not only your own foreign bank accounts but were also some that you had signatory authority over through an employer. {About thresholds in my post here}

Your Compliance Options: Voila! 
  • You can now file those delinquent FBAR reports per instructions. 
  • Attach a statement explaining why the statements are late. 
  • Mail the delinquent FBARs to- Department of Treasury, P O Box 32621, Detroit, MI 48232.

II. You only have certain delinquent returns but no tax due. So you are the "lucky" one, you did not have any tax due but you failed to file certain tax information returns such as, Form 5471 or Form 3520. Or you had reported all taxable income arising from taxable income with respect to transactions relating to these forms. 

Your Compliance Options: 
  • You should go ahead and file these delinquent forms with the proper authorities (as per form instructions) 
  • With a statement attached (of course) explaining why they are late. 
  • The IRS will not impose a penalty for the failure to file Forms 5471 or 3520 if there are no under-reported tax liabilities. 
  • You should also not have been already contacted by the IRS regarding these delinquent forms.  

III. You are a non-resident US Taxpayer, you have delinquent returns- however your tax owed is less than $1,500 per year. So you have been abroad and have not filed your tax returns and your FBARs. You only owe less than $1,500 per year.

Your Compliance Options: 
  • File your delinquent tax returns for the last 3 years. 
  • Include any delinquent tax information returns with the bullet point above. 
  • File any delinquent FBARs for the past 6 years. 
  • Give all the required additional information compliance risk. 
  • Pay any outstanding federal tax and interest due with the outstanding returns. 
IV. You are a taxpayer with undisclosed foreign accounts and unreported income or you are a taxpayer seeking protection from criminal prosecution. 

Your Compliance Option: The Offshore Voluntary Disclosure Program aka OVDP. 

Please note that to decide if any of the above four situations apply to you and for further guidance regarding your compliance options, I cannot stress enough how important it is to consult with an informed and experienced Enrolled Agent, CPA or Tax Attorney. 

Bibliography: FS-2011-13; Report of Foreign Bank and Financial Accounts (FBAR); Form 5471 ; Form 3520. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,



Sunday, February 1, 2015

Green Card Holders:Residency in Foreign Country & Treaty Benefits!

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Tracking Storm Linus on the weather websites, watching the storm blow around the white stuff all day long, snow piling up 16 inches and more on it's way, sneaking peeks at the Super Bowl while trying to write up this post- I realized how far we have come--long, long ways from being Green Card holders. 

But I do remember that the transition to Green Card holder from a visa holder can be a somewhat exhilarating, somewhat frustrating journey. This process can take a long time and comes with a lot of trials and tribulations. 

The tax rules for a green card holder remain fairly the same as a US citizen or a long time US resident for most purposes. The complications come into play when the Green Card holder's living circumstances change. 

So, let's say you had to leave the US of A, to live in a foreign country and you can be considered a resident of that country for it's tax purposes. That would make you a dual-resident tax payer- a resident of both the U.S. and another country under each country's tax laws. In such a case, you need to examine if a tax treaty exists between the country you are living in and the U.S. 

The definition of residency under U.S. tax laws does not override tax treaty definitions of residency. This means that, if you are a dual-resident taxpayer, you can claim the benefits under an existing income tax treaty. In order for you to do that, the Income Tax Treaty between the 2 countries must contain a tie-breaker rule. 

What is a tie-breaker rule? A tie-breaker rule is a provision in the tax treaty that provides for a resolution if you have conflicting claims of residency. Now here is the catch (good or bad-depends on how you look at it), if you claim treaty benefits as a resident of that country, you are treated as a nonresident alien in figuring your U.S. income tax. 

Does this effect your residency time periods? No. For purposes other than figuring your income tax, you will still be treated as a U.S. resident. 

Now that you are a dual-resident taxpayer, and you claim treaty benefits as a resident of the country where you live, you must file Form 1040NR or Form 1040NR-EZ and compute your tax as a non-resident alien in the US. The form has to be filed by the due date (including extensions). You may also need to attach a fully completed Form 8833, if you receive payments or income items totaling more than $100,000. 

Form 8938 and other FATCA obligations may continue to apply to you. Do you need to file the FBAR forms? Read and find out here

You may also be subject to expatriation tax in some cases. More on that in my blog post here

This is a complicated scenario to be in and you need to make sure all your "t"s are crossed and "i"s dotted. Please be sure to consult with an Enrolled Agent or other tax professional before you file your taxes. 

Bibliography: Publication 519; Tax Treaties; Form 8938; Form 8833Regulations §301.7701(b)-7;

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Thursday, January 15, 2015

Tax Consequences For Foreign Students...Think F, J Visas

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My husband & I chartered a course ourselves long ago in the stormy waters of visas, tax treaties and tax consequences. Considering taxes have just got even more complicated, so its no surprise that I field quite a lot of questions from various visa holders especially foreign students on F-1 visas. Suffice to say that the range of information for foreign students is too much to cover in one blog post, so I will focus on the main points. If you need any more information, you know where to reach me! 

If you are a foreign student, you already know from your university that you are one of those who are subject to special rules with respect to the taxation of your income. Usually a foreign student is on an F, J, M, or Q visa. 

The Substantial Presence Test (SPT): 

Most US residents, citizens or not, have to follow the substantial presence test in order to determine how they will file their taxes. 
  • To fulfill the SPT, one must pass both the 31-day & the 183-day test. 
  • However, if you are a foreign student on any of the above visas, you are considered an "exempt" individual. 
  • You cannot be exempt for more than 5 calender years. 
  • Unless (don't you love an exception to an exception?)- you can prove to the IRS that you were more closely connected to your home country. 
Tax Payer Identification Numbers (TIN)/ Social Security Numbers (SSN):

Most foreign students and scholars in F-1, J-1, M-1, Q-1, and Q-2 non-immigrant status are eligible to be employed in the United States, and are therefore eligible to apply for an SSN if they are actually employed in the United States

Social Security/ Medicare Tax:

Generally nonresident Alien students present in the United States in F-1,J-1,M-1, or Q-1/Q-2 non-immigrant status are exempt on social security tax on wages paid to them,  
  • For services performed within the United States as long as such services are allowed by USCIS for their status, 
  • And such services are performed to carry out the purposes for which the visa was issued to them.

Exempt Employment may include:
  1. On-campus student employment up to 20 hours a week (40 hrs during summer vacations).
  2. Off-campus student employment allowed by USCIS.
  3. Practical Training student employment on or off campus.
  4. Employment as professor, teacher or researcher.
  5. Employment as a physician, au pair, or summer camp worker.

Limitations on exemption are:
  1. The exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 non-immigrant status.
  2. The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
  3. The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 non-immigrants who change to an immigration status which is not exempt or to a special protected status.
  4. The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 non-immigrants who become resident aliens.

Scholarships, Fellowships and Grants:

Generally scholarships, fellowships and grants paid to foreign students is not reportable nor are they taxable. However, the following must be kept in mind: 

  1. All amounts paid to NONRESIDENT ALIENS in the form of scholarships, fellowships, grants, and financial aid, which are not excludible from gross income as a "qualified scholarship" under Internal Revenue Code section 117 must be reported to IRS on Forms 1042 and 1042-S.
  2. Foreign students are subject to a reduced 14% withholding rate (rather than the regular 30%) on the taxable portion of a scholarship/ fellowship/ grant because such individuals are considered to be engaged in a U.S. trade or business under Internal Revenue Code section 871(c). This is not applicable if the foreign student is a non-degree candidate.
  3. If the foreign student wants to claim that part or all of his scholarship or fellowship is exempt from taxation because of a tax treaty must file Form W-8BEN with the university office charged with receiving and processing such forms. Or he may claim a treaty exemption on Form 8233. 
Tax Treaty With Home Country:

If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, withholding for certain items of income, you should notify the payer of the income (the withholding agent) of your foreign status to claim the benefits of the treaty. You cannot do this however, if you have made an election with your U.S. citizen or resident spouse to be treated as a U.S. resident for income tax purposes. 

However, the exceptions to the saving clause in some treaties allow a resident of the United States to claim a tax treaty exemption on U.S. source income.

Like I always say, there are many nuances and exceptions to all of the above, that I cannot possibly cover in a single blog post. Please contact a tax professional to address your unique situation if you are a foreign student. 

Bibliography: Pub 519; Form W-8BEN; Form 8233; Form 8833;; § 6114; § 7701; Tax Treaties

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Tuesday, December 30, 2014

Tax Extenders, Tax Extenders....Check If You Won The Extender Lottery!!

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Well, it is December 30th, 2014 and as I sit down to write up the last blog post of the year, I realize how much I have enjoyed writing this year! This blog has brought a lot of traffic my way, I have gained a few clients, engaged in some very interesting conversations with fellow professionals and learnt a lot about the roller-coaster social media world! Thanks to my readers from the bottom of my heart! 

The conversations around tax planning sessions these days has been how quickly can we file in the coming tax season (hopefully on time!) and of course the hype around the Tax Extenders Bill that Congress passed early this month and President Obama signed soon after. So what was the drama all about? 

Individual Tax Extenders:

These are the tax breaks that were set to expire at the end of the year and have been extended through the end of 2014: 

  • State and Local General Sales Tax Deduction: 
Taxpayers can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A of Form 1040. The taxpayer may either deduct the actual amount of sales tax paid in the tax year, or, alternatively, an amount prescribed by the IRS. 

  • Mortgage Insurance Premiums Treated As Qualified Residence Interest:
Mortgage insurance premiums (MIP) are generally charged by your mortgage company if you had a down payment of less than 20% of the loan. Taxpayers can treat mortgage insurance premiums paid during the year for qualified mortgage insurance as qualified residence interest. So you can continue to deduct MIP paid during the year on your Schedule A of Form 1040. 
In order to do this, the insurance must be in connection with acquisition debt (mortgage) for a qualified residence, and the insurance contract must have been issued after 2006. 
This deduction phases out ratably for taxpayers with adjusted gross income of $100,000 to $110,000 (half those amounts for married taxpayers filing separately). 

  • Exclusion From Income of Discharge of Qualified Principle Residence Indebtedness:
This is a big one! If you had an outstanding balance on your mortgage & if it was forgiven, this discharge is still generally excludable from your gross income. 

  • Deduction for Qualified Tuition and Related Expenses:
You may deduct up to $4,000 of qualified education expenses paid during the year for yourselves, your spouse, or your dependents. 
Your maximum deduction is $4,000 if your adjusted gross income for the tax year does not exceed $65,000 ($130,000 in the case of a joint return), or $2,000 for other individuals whose adjusted gross income does not exceed $80,000 ($160,000 in the case of a joint return). 
For those with incomes above the maximum threshold, no deduction is allowed. 

  • Tax-Free Distributions from IRA Plans to Charity:
A qualified charitable distribution from an individual's IRA is excluded from the individual's gross income. If you are 70 1/2 years of age, you can exclude up to $100,000 per taxpayer, per year. 

  • Certain Expenses of Elementary and Secondary School Teachers:
If you are an elementary or a secondary school teacher, you can exclude up to $250 of qualified expenses they paid during the year from gross income. If you are filing jointly and are both elementary or secondary school teachers, you can each include $250 in expenses paid. 

  •  Parity for Employer-Provided Mass Transit and Parking Benefits: 
Tax Increase Prevention Act (TIPA) of 2014 extends through 2014 the maximum monthly exclusion amount for transit passes and van pool benefits to $250 per month so that these transportation benefits match the exclusion for qualified parking benefits. 

  • Contributions of Capital Gain Real Property Made for Conservation Purposes:

 If you contributed to a qualified conservation purpose, your deduction is generally limited to 50% of your adjusted gross income (AGI), minus your deduction for all other charitable contributions. TIPA extends this and also extends the enhanced 100% deduction for individual and corporate farmers and ranchers for contributions of property used in agriculture or livestock production. 

Pictures Courtesy: Google Images

There were tax breaks that were not extended, these were: (1) the health coverage tax credit for displaced workers and retirees; (2) the plug-in motorcycle tax credit; (3) the energy-efficient appliance credit; (4) New York Liberty Zone tax-exempt bond financing and; (5) partial expensing of refinery equipment.

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,


Friday, December 19, 2014

The Mysterious Form 1099-MISC- Unveiled!

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My first interesting encounter with the Form 1099-MISC was many, many years ago when I worked with a big box tax prep company. A guy walked in with literally a shoe-box full of these forms all made out to him under his Social Security Number. We spent quite a huge chunk of time getting through those but boy did I learn fast on the ins & outs of this mysterious form! 

What is Form 1099-MISC?: 

Form 1099-MISC, Miscellaneous Income, is issued to a person if any of the following situations occur, when a trade or business or some other qualified organization pays:

  • If at least $10 in royalties or broker payments are paid to a person 
  • At least $600 in: rents; services performed by someone who is not your employee; prizes and awards; other income payments; medical and health care payments; crop insurance proceeds; cash paid from a notional principal contract to an individual, partnership, or estate; payments to an attorney among others, are paid to a person.
  • To report that direct sales of at least $5,000 of consumer products were made to a buyer for resale anywhere other than a permanent retail establishment. 

What Would You Do If You Received A Form 1099-Misc?:

If any of the above circumstances applied to you, and you happened to receive a Form 1099-MISC, you would first look at what box of the form, the amount is reported in. For example, items in, boxes 1 & 2 would most of the times go on the Schedule E; box 3 on line 21; box 7 on a Schedule C; and so on. Instructions in greater detail are here

Items in Box 7, Non-Employee Compensation: 

Usually, you would be issued a Form 1099-MISC with amounts in Box 7 if you were an independent contractor and were not on an organization's payroll. These numbers would usually go on a Schedule C, you would be able to deduct costs related to obtaining this income. The expenses to be deducted need to be backed up by receipts and please note that this is a highly audited area by the Internal Revenue Service, hence due diligence has to be maintained at all times with record-keeping. 

If you need to know if you were an independent contractor versus an employee, please do read my blog-post here

Change in Tax Liability Due to Form 1099-MISC: 

Most times, if you know that you will receive a Form 1099-MISC from someone, and/ or it is the first time you have ever received such a form, be prepared that your taxes for the year may be higher than usual. You will have to consult with a tax professional to estimate what your tax liability might be. 

FATCA Filing Requirements of Certain Foreign Financial Institutions (FFIs): 

Beginning in 2014, an FFI with a Chapter 4 requirement to report a U.S. account maintained by them, and held by a specified U.S. person may satisfy this requirement by reporting on Form 1099-MISC. 

Also, a U.S. payor may satisfy its Chapter 4 requirement to report such a U.S. account by reporting on Form 1099-MISC. 

A new check box was added to Form 1099-MISC to identify an FFI filing this form. So, if you receive a Form 1099-MISC with a check in the box "FATCA Filing Requirement", examine your filing thresholds for FinCEN Form 114 and/ or Form 8938. More about these thresholds in my blog posts here, here and here.  

Please consult a qualified tax professional if any of the above apply to you. A tax professional has the tools at their disposal to give you the best advice there is and guide you with your future in mind. 

Bibliography: Form 1099-MISC; FinCEN Form 114; Form 8938;  Regulations section 1.1471-4(d)(5)(i)(A). 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,

Saturday, December 13, 2014

This Just In! Final Regulations On Reporting of Foreign Specified Assets On Form 8938!

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If you remember from my blog post here, Form 8938, is the Statement of Specified Foreign Financial Assets. This form is required to be filed to remain in compliance with IRC § 6308D. You may not have known that the Internal Revenue Service hadn't yet made the 2011 rules & regulations under this code final, comments & concerns were still being gathered. 

The Internal Revenue Service on December 11th, 2014 has issued final regs that provide guidance on the requirement under Code § 6038D, for Form 8938 filers. This provides more information and clarifications on certain filers, types of assets to be reported, valuation etc.

The final regs apply for tax years ending after Dec. 19, 2011, but taxpayers may apply them to earlier years.

To quickly recap, the Form 8938, has to filed by individuals with an interest in a "specified foreign financial asset" during the tax year in which the aggregate value of all such assets at the end of the year is $50,000 for Single filers and $100,000 for filers with the status Married Filing Jointly. IRC § 6308D also applies to a domestic entity that has been formed or used for purposes of holding specified foreign financial assets in the same way as if it were an individual. 

If the Form 8938 is not filed as required during a tax year, there is a penalty of $10,000. This penalty increases if the taxpayer continues to stay non-compliant.

Specified Foreign Financial Assets are:

(1) Depository or custodial accounts at foreign financial institutions, 
(2) To the extent not held in an account at a financial institution, 
       (a) Stocks or securities issued by foreign persons, 
       (b) Any other financial instrument or contract held for investment that is issued by 
            or has a counter-party that is not a U.S. person, and 
       (c) Any interest in a foreign entity. 

  Final regs. 
In late December of 2011, IRS issued temporary and proposed regs detailing the Code Sec. 6038D requirement for individuals to attach a statement to their income tax return to provide information on foreign financial assets in which they had an interest At that time, IRS also released the final version of Form 8938 (Statement of Specified Foreign Financial Assets) and its Instructions.

IRS has adopted the 2011 temporary regs as final regs with certain modifications described below. 

Dual resident taxpayers: 
The final regs provide an exemption from the Code Sec. 6038D reporting requirements for a dual resident taxpayer who determines his U.S. tax liability as if he were a nonresident alien and claims a treaty benefit as a U.S. nonresident by 
  • Timely filing a Form 1040NR, Nonresident Alien Income Tax Return (or such other appropriate form under that section), and 
  • Attaching a Form 8833, Treaty-Based Return Position Disclosure. 

Persons not required to file tax return:
As provided in the 2011 temporary regs, the final regs provide that a specified person that doesn't have to file a tax return for the year doesn't have to file a Form 8938.

Non-vested property: 
The final regs clarify that a specified person that is transferred property in connection with the performance of personal services is first considered to have an interest in the property for purposes of Code Sec. 6038D on the first date that the property is substantially vested or, in the case of property with respect to which a specified person makes a valid election under Code Sec. 83(b), on the date of transfer of the property. 

Assets held by a disregarded entity (most times an LLC):
The final regs provide that a specified person that owns a foreign or domestic entity that is a disregarded entity, is treated as having an interest in any specified foreign financial assets held by the disregarded entity. 
As a result, a specified person that owns a disregarded entity (whether domestic or foreign) that, in turn, owns specified foreign financial assets, must include the value of those assets in determining whether the specified person meets the reporting thresholds under IRC § 6308D and, if so, must report the assets on Form 8938. 

Jointly owned assets for those who are not married to each other:
The final regs clarify that each of the joint owners of a specified foreign financial asset who are not married to each other must include the full value of the asset (rather than only the value of the specified person's interest in the asset) in determining whether the aggregate value of the specified individual's specified foreign financial assets exceeds the applicable reporting thresholds, and each joint owner must report the full value of the asset on his or her Form 8938. 

Jointly owned assets for those who are married to each other, but file separately:
The final regs also clarify that, in the case of joint owners who are married to each other and file separate returns, each joint owner of a specified foreign financial asset must report the full value of the asset (rather than only the value of the specified person's interest in the asset) on the individual's Form 8938, even if both spouses are specified individuals and only one-half of the value of the asset is considered in determining the applicable reporting thresholds under IRC§ 6038D. 

Specified foreign financial assets: 
The final regs modify the definition of a financial account for purposes of Code Sec. 6038D in order to require consistent reporting under Code Sec. 6038D with respect to:  

  • Retirement and pension accounts and certain non-retirement savings accounts:      For tax years beginning after Dec. 12, 2014, the final regs also provide that retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in Reg. § 1.1471-5(b)(2)(i) and that are excluded from the definition of a financial account under an applicable Model 1 IGA or Model 2 IGA (as provided in Reg. § 1.1471-5(b)(2)(vi)), are included in the definition of a financial account for Code Sec. 6038D purposes. 
  • Stock, securities, financial instruments, and contracts that are held for investment: The final rule clarifies that specified foreign financial assets include stock, securities, financial instruments, and contracts that are held for investment and not held in an account maintained by a financial institution and are issued by a person organized under the laws of a U.S. possession. 

The final regs clarify that the maximum fair market value for a specified foreign financial asset with no positive value during the year is treated as zero. 

Foreign currency:
The final regs adopt two modifications to the valuation rules relating to foreign currency:  
  • First, the final regs state that a foreign currency conversion shown on a periodic financial account statement is among the aspects of the statement that a taxpayer may rely upon to the extent provided in Reg. § 1.6038D-5(d).
  • Second, IRC § 6038D of the 2011 temporary regs provides that, except as otherwise provided, a specified person must use the foreign currency exchange rate issued by the U.S. Treasury Department's Financial Management Service for purposes of Code Sec. 6038D. The final regs are updated to reflect the fact that foreign currency exchange rates are now issued by the Treasury Department's Bureau of the Fiscal Service. 
Please consult with a tax professional for advice on Form 8938,it's thresholds and compliance requirements if the rules under IRC Section 6308D apply to you. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,