IRS Suspends Foreign Asset, Passive Foreign Investment Company Information Reporting Rules


The IRS announced on Tuesday that it is suspending the 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.

 

The IRS also warns that this filing obligation suspension does not extend to Forms TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if an FBAR is otherwise required to be filed.

 

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 counterpart 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. Both sections were added to the Code in 2010 by the Hiring Incentives to Restore Employment Act (PL 111-147).

 

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