The Tax Times: The IRS has posted an Update to the Instructions for Form 8938 for 2014

This update reflects changes to the Form 8938 reporting requirements made in the final regulations under section 6038D of the Internal Revenue Code ("final section 6038D regulations"). TD 9706, 79 FR 73817, 2014-53 IRB 890 (December 12, 2014). It also contains additional information not included in the published 2014 Instructions for Form 8938 (Rev. December 2014) ("published 2014 instructions").

Dual resident taxpayers
The final section 6038D regulations have changed the reporting rules for dual resident taxpayers, effective for taxable years beginning after December 19, 2011. For this reason, the published 2014 instructions and the instructions for Form 8938 for prior years are modified as provided in this update.

The following Form 8938 reporting rules, as more fully set forth in the final section 6038D regulations, apply to a dual resident taxpayer (within the meaning of §301.7701(b)-7(a)(1)) who determines his or her income tax liability for all or a portion of the taxable year as if he or she were a nonresident alien as provided by §301.7701(b)-7:

Specified individual filing as a nonresident alien at the end of his or her taxable year

A specified individual who computes his or her U.S. income tax liability as a nonresident alien on the last day of the taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the individual’s taxable year covered by Form 1040NR, “U.S. Nonresident Alien Income Tax Return,” or Form 1040NR-EZ, “U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents,” as applicable, if the individual complies with the filing requirements of §301.7701(b)-7(b) and (c). These requirements include the requirement to timely file Form 1040NR or Form 1040NR-EZ, as applicable, and attach Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).”

Specified individual filing as a resident alien at the end of his or her taxable year

A specified individual who computes his or her U.S. income tax liability as a resident alien on the last day of the taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the individual’s taxable year reflected on the schedule to Form 1040, "U.S. Individual Income Tax Return," or the schedule to Form 1040EZ, "Income Tax Return for Single and Joint Filers With No Dependents," as applicable, that is required by §1.6012-1(b)(2)(ii)(a), if the individual complies with all of the filing requirements of §1.6012-1(b)(2)(ii)(a). These requirements include the requirement to timely file Form 1040 or Form 1040EZ, as applicable, and attach a properly completed Form 8833 to the schedule to such Form 1040 or Form 1042EZ.

Accounts excluded from the definition of a financial account under an applicable Model 1 or Model 2 IGA

For taxable years beginning on or before December 12, 2014, if the jurisdiction in which a financial account is maintained has an IGA in effect, or is treated as having a Model 1 IGA or Model 2 IGA in effect, on or before the last day of the taxpayer's taxable year, retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in 1.1471-5(b)(2)(i) that are excluded from the definition of financial account in such IGA are not required to be reported on Form 8938.

NOTE: For taxable years beginning after December 12, 2014, the final section 6038D regulations provide that, in addition to retirement and pension accounts and non-retirement savings accounts described in §1.1471-5(b)(2)(i), any retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in §1.1471-5(b)(2)(i) that are excluded from the definition of financial account in an applicable Model 1 IGA or Model 2 IGA must be reported by the taxpayer on Form 8938. Thus, such accounts are subject to uniform reporting rules and must be reported without regard to whether the account is maintained in a jurisdiction with an IGA.

Joint Form 5471 or Form 8865 filing
A specified person that is included as part of a joint Form 5471 filing or a joint Form 8865 filing and who notifies the Internal Revenue Service as required will be considered to have filed a Form 5471 or Form 8865. Accordingly, the taxpayer does not have to report any asset on Form 8938 if the asset is reported on such Form 5471 or Form 8865 that is timely filed with the IRS for the same tax year and the taxpayer reports on Form 8938 the filing of the form on which the asset is reported.

Correction of references to U.S. Treasury Department's Financial Management Service

The U.S. Treasury Department's Financial Management Service has been consolidated into the U.S. Treasury Department’s Bureau of the Fiscal Service. Thus, references in the 2014 instructions to the U.S. Treasury Department’s Financial Management Service or U.S. Treasury Financial Management Service should be changed to the U.S. Treasury Department’s Bureau of the Fiscal Service.

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