The HIRE Act (Hiring Incentives to Restore Employment Act) has included several provisions to increase foreign compliance.
Under current law, U.S. persons with a financial interest in a foreign account in a foreign country must make a report on TD F 90-22.1 (Report of Foreign Bank and Financial Accounts or FBAR) for each calendar year during which the aggregate value of the accounts exceed $10,000. Civil penalties for non-willful violation are up to $10,000 and willful violations are up to the greater of $100,000 or 50% of the value in the account.
Effective for tax years beginning after March 18, 2010, in addition to the current law, the HIRE Act requires individuals holding an interest in specified foreign assets to attach to his or her individual income tax return certain information about the asset. These new disclosure requirements only apply if the aggregate values of all “specified foreign financial assets” exceed $50,000.
A “specified foreign financial asset” includes:
- An account in a foreign financial institution, and
- Any of the following assets not held in an account maintained by a financial institution: a stock or security issued by a foreign entity, any financial instrument or investment contract where the issuer is not a U.S. entity, and any interest in a foreign entity.
The disclosures required in the case of any stock or security are the name and address of the issuer and the maximum value of the asset during the year.
Individuals who fail to make the required disclosures will be subject to a minimum penalty of $10,000 and a maximum penalty of $50,000.
If you have questions concerning the requirements of foreign financial assets, feel free to contact us.
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