The IRS suspended FATCA (Foreign Account Tax Compliance Act) information reporting requirements for certain individuals with foreign assets and shareholders of passive foreign investment companies (PFICs) under IRC §§ 6038D and 1298(f) (Notice 2011-55). The requirement will be suspended until the IRS releases Form 8938, Statement of Specified Foreign Financial Assets, and a revised Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or a Qualified Electing Fund.
Individuals required to report an interest in one or more specified foreign financial assets under section 6038D will be required to attach Form 8938 to their income tax return once Form 8938 is released. PFIC shareholders required to report under section 1298(f) will be required to attach Form 8621 to their income tax return or information return. Individuals and PFIC shareholders whose filing obligations are suspended under Notice 2011-55 will be required to file Form 8983 or Form 8621 (as appropriate) for the suspended tax year, attached to their next income tax or information return.
The suspension of the Form 8621 filing requirement applies only to PFIC shareholders that are not otherwise required to file Form 8621 under the current Form 8621 instructions. PFIC shareholders with current Form 8621 reporting obligations must continue to file the current Form 8621.
Section 6038D imposes reporting requirements on individuals who hold more than $50,000 (in the aggregate) in (1) any financial account maintained by a foreign financial institution or (2) any foreign stock, interest in a foreign entity (including a foreign trust), or financial instrument with a foreign counterparty that is not held in a custodial account of a financial institution. Section 1298(f) requires a U.S. person that is a PFIC shareholder to file an annual report. For prior JofA coverage of FATCA, see “The Foreign Account Tax Compliance Act,” Aug. 2010, page 44.
The IRS also warned that this filing obligation suspension does not extend to Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if an FBAR is otherwise required to be filed. In separate guidance, however, the IRS and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently granted filing extensions for Form TD F 90-22.1 to certain individuals beyond the regular filing date of June 30, 2011. For persons with signature authority over a foreign financial account but no financial interest in the account, the IRS in Notice 2011-54 granted a further extension for 2009 or earlier years to Nov. 1, 2011.
U.S. persons with a financial interest in, or signature authority over, any financial accounts (including bank, securities or other types of financial accounts) in a foreign country must file an FBAR if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
The IRS had previously extended the filing deadline for persons with signature authority over, but no financial interest in, a foreign financial account for 2009 and earlier years to June 30, 2011 (see IRS notices 2009-62 and 2010-23).
The extension applies only to FBARs for 2009 or earlier years; the FBAR deadline for reporting financial accounts for 2010 remains June 30, 2011.
The IRS cautioned that the extension does not affect the requirement to provide information or file FBARs in connection with the 2009 or 2011 offshore voluntary disclosure initiatives and does not alter the deadline for electing to participate in those initiatives.
Then, FinCEN issued two notices that gave a one-year FBAR filing extension, until June 20, 2012, to individuals with only signature authority over certain foreign financial accounts (Notice 2011-2), and to certain financial professionals (Notice 2011-1).
Notice 2011-2 extends the deadline until June 30, 2012, for “officers and employees of investment advisors registered with the Securities and Exchange Commission with signature or other authority over (but no financial interest in) the foreign financial accounts of persons that are not registered investment companies” under the Investment Company Act of 1940. Notice 2011-1 similarly extends the deadline for officers and employees of an entity or controlled person of the entity who have signature or other authority over, but no financial interest in, a foreign financial account of the entity or a controlled person of the entity.
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