# New FATCA Form 8938 with More Penalties: "Statement of Specified Foreign Assets"



## Guest

*New FATCA Form 8938 with More Penalties: "Statement of Specified Foreign Assets"*

There is a new FATCA-related form that applies from 2011 onwards:

ACA American Citizens Abroad - Warning to all Overseas Americans

I looked at the requirements to file this form on the IRS website quickly and it looks like you need to file this if your "foreign specified assets" total US $200,000 or more. Doesn't apply to me, but I thought that I would mention this as I imagine that this is yet another barely announced form that the IRS will use to catch people who have even filed FBARs and tax returns and levy another fine. 

Why else would they need yet another form on top of the normal FBAR and the one for declaring assets over $50,000: Increased chances that you will forget one of the forms so that they can cash in! The penalties mentioned in the IRS form instructions are as follows:

$10,000 starting penalty for failing to file even if you wouldn't owe anything. The IRS will then send a form telling people to file within 90 days. If you don't do this the penalty increases by another $10,000 every 30 days up to a maximum of $50,000. Right underneath they mention that married couples are treated as a single, taxable entity and the penalty applies to both. I shudder to think what the possible combined penalties of having a large bank account and not filing the the FBAR, the $50,000 form and this one as well. Mind boggling, really.


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## Guest

DonPomodoro said:


> There is a new FATCA-related form that applies from 2011 onwards
> 
> 
> $10,000 starting penalty for failing to file even if you wouldn't owe anything. The IRS will then send a form telling people to file within 90 days. If you don't do this the penalty increases by another $10,000 every 30 days up to a maximum of $50,000. Right underneath they mention that married couples are treated as a single, taxable entity and the penalty applies to both. I shudder to think what the possible combined penalties of having a large bank account and not filing the the FBAR, the $50,000 form and this one as well. Mind boggling, really.


I thought I read that there is a 40% penalty for calculation errors.


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## Guest

nobledreamer said:


> I thought I read that there is a 40% penalty for calculation errors.


Wow! Really? I was just talking about the penalty for not filing, but you're saying that even if you do file then if it isn't picture perfect they can levy a different 40% penalty? Imagine if you failed to file, received the letter, ignored it up to the 50,000 dollar penalty and then filed but made an error...It makes my head spin


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## Mona Lisa76

This new form will become the IRS's main bludgeoning tool because it will be easier to enforce its associated fines than via FBAR due to various technicalities. They'll probably use FBAR fines more for criminal cases and 8938 more for civil penalties.

It will also have to retroactively filed back to the 2011 tax year even if delayed for several years. Thus SOLs won't start to run for 2011 till after the form has come out and is retroactively filed. It will by stealth enable the IRS to more closely monitor movements of assets leading up to FATCA. Thus, no place to hide!

The only positive I can see from all this is that I doubt they'll clobber people for FBAR and not filing who've made good faith disclosures this year, as they'll soon enough have the 8938 in their arsenals.

It's risk of penalties for getting it wrong will scare me into relying on professional help forever though. It's all a racket! I'm sure the accountants are laughing all the way to the bank!!


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## Guest

DonPomodoro said:


> Wow! Really? I was just talking about the penalty for not filing, but you're saying that even if you do file then if it isn't picture perfect they can levy a different 40% penalty? Imagine if you failed to file, received the letter, ignored it up to the 50,000 dollar penalty and then filed but made an error...It makes my head spin


Sorry, as usual, I didn't quite decipher the IRS-speak quite clearly.....it applies if you underpay your tax as a result of a transaction involving an undisclosed asset-you pay 40% of the underpayment.

my other favorite of this i8938 is the "reasonable cause exception" for not filing the 8938...."the fact that a foreign jurisdiction would impose a civil or criminal penalty on you if you disclose the required information *is not reasonable cause.*

http://www.irs.gov/pub/irs-dft/f8938--dft.pdf

all this info on page 6-bottom of 2nd column to 3rd column....


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## AmTaker

Actually, this form is less menacing (to me anyway) than the FBAR form because the penalties are actually lower, and maybe considerably lower, while those for FBARs can be draconian. Plus, the conditions for reasonable cause under the US tax code are reasonably defined, while those for FBARs are not (so there is more uncertainty). 

Finally, I actually see the fact that this is part of the tax code as being a good thing in a way, since it means that these penalties can be challenged in tax court, while FBAR penalties have to go to regular US courts.


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## Mona Lisa76

AmTaker said:


> Actually, this form is less menacing (to me anyway) than the FBAR form because the penalties are actually lower, and maybe considerably lower, while those for FBARs can be draconian. Plus, the conditions for reasonable cause under the US tax code are reasonably defined, while those for FBARs are not (so there is more uncertainty).
> 
> Finally, I actually see the fact that this is part of the tax code as being a good thing in a way, since it means that these penalties can be challenged in tax court, while FBAR penalties have to go to regular US courts.


True. It also means though that they will be more quick to levy fines because it will be directly in their arsenal and also be constitutional due to being less draconian. I suspect that they will rarely seek FBAR civil fines except in cases of blatant fraud. 

So less at stake but higher risk of them actually following through and levying the associated fines. I'm sure that accountants will raise the fees too.

Having a base of $200,000 assets to report as a MFS may sound like a lot but many with pension funds and even modest inheritances could easily surpass this amount of wealth. I would have thought that half a million or even a million dollars would have seemed like a more reasonable cut off point.

But as I say, I think this form could turn out to be a blessing in disguise for someone like me even though ongoing compliance will be onerous. I still think even a ten thousand dollar fine is pretty stiff though


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## Vangrrl

I think it can be safely assumed that the IRS could completely wipe each and everyone of us out of our life savings if they really decided to apply all of these laws _as written_. 

I'm just can't get excited about _another_ one of these stupid forms.


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## Guest

iT IS NOT difficult to get to 200,000. Consider your house, rrsp, savings etc.


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## TooMuchCoffee

Mach7 said:


> iT IS NOT difficult to get to 200,000. Consider your house, rrsp, savings etc.




I don't think house value is included though.

(and: I hope this posts properly. This is my first-ever post on this forum. Let's see...


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## Mona Lisa76

Vangrrl said:


> I think it can be safely assumed that the IRS could completely wipe each and everyone of us out of our life savings if they really decided to apply all of these laws _as written_.
> 
> I'm just can't get excited about _another_ one of these stupid forms.


True, but who's to say with their huge deficits that they might start routinely fining loads of expats, say, $10,000? It's enough to raise serious revenue without being a life-changing amount for the bulk of middle class folk. It would make people very angry but if it happened to me, I wouldn't be able to afford all the fsncy attorneys to protect me so would probably grudgingly cough up. I'd like to believe I'd be principled and fight it to the death but then there's real life and practicalities.

It seems to me that the 8938 could very well catch a lot of people out who didn't become compliant this year.

As with many things, it will be the squeezed middle who could well be hit the most. All I can think is how lucky I was to have become compliant this year because this form will probably be the IRS's main cudgel, especially for those who've under-reported pfic income, for instance. It will also help filers double check that they've filed all the correct forms but make it much harder to claim ignorance as a reasonable excuse when the 8938 will blatantly ask about fbar, 8621, 5471, 3520, etc.


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## Guest

One more reason to shed your US citizenship as soon as you can ...


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## Mona Lisa76

Schubert said:


> One more reason to shed your US citizenship as soon as you can ...


Easier said than done when there's family ties though.


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## Guest

Mona Lisa76 said:


> True. It also means though that they will be more quick to levy fines because it will be directly in their arsenal and also be constitutional due to being less draconian. I suspect that they will rarely seek FBAR civil fines except in cases of blatant fraud.


Spot on. They even said recently that they would waive FBAR penalties for first time penalties and pay back those who already paid under the voluntary disclosure programme:

U.S. taxman to go easy on American residents in Canada - The Globe and Mail

The new form will be the new cash cow for sure.

Edit: Just saw the main post on the form about this article!


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## AmTaker

DonPomodoro said:


> Spot on. They even said recently that they would waive FBAR penalties for first time penalties and pay back those who already paid under the voluntary disclosure programme:
> 
> U.S. taxman to go easy on American residents in Canada - The Globe and Mail


Where do they say they would waive first time FBAR penalties ? 

Besides, what exactly is a 'first time' ? if someone hasn't filed FBARs for 3 years, does that mean only the 'first' year would be waived ?


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## Guest

AmTaker said:


> Where do they say they would waive first time FBAR penalties ?
> 
> Besides, what exactly is a 'first time' ? if someone hasn't filed FBARs for 3 years, does that mean only the 'first' year would be waived ?


Sorry "first time" was a bit vague. I was referring to people who never reported anything or hadn't heard of an FBAR and begin to file now. Here is a direct quote from the article, found a bit lower down towards the end:

"U.S. citizens who were unaware of the bank account reporting requirement can file previous reports now, along with a statement explaining why they’re late. No penalty will be imposed if the IRS determines that there is reasonable cause"

The real question I guess is how "reasonable cause" will be determined.


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## Guest

DonPomodoro said:


> Sorry "first time" was a bit vague. I was referring to people who never reported anything or hadn't heard of an FBAR and begin to file now. Here is a direct quote from the article, found a bit lower down towards the end:
> 
> "U.S. citizens who were unaware of the bank account reporting requirement can file previous reports now, along with a statement explaining why they’re late. No penalty will be imposed if the IRS determines that there is reasonable cause"
> 
> The real question I guess is how "reasonable cause" will be determined.


Yes, and this, along with no penalties for late filings if no taxes owed, is what makes that article totally misleading. There is absolutely nothing new in these two areas.


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