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pdf16 December 2010
Gerald Shields, IRS
Room 6129
1111 Constitution Avenue, NW
Washington DC 20224
Re: Comments on Draft Form 8938
Dear Mr. Shields,
I am a US citizen living overseas since 1981. The vast majority of my income, including
my payroll is sourced from the UK where I live. As such, I will be directly affected by
the proposed changes to US tax forms, and so wish to make a few comments regarding
the proposed new Form 8938, Statement of Foreign Financial Assets.
- I see this new proposed form as largely duplicating the current Form TD 90-22.1
which is also required to be completed each tax year and sent to the US Department of
Treasury in Detroit.
- As with Form TD 90-22.1, I will be required to complete the new form for both
current and matured/closed accounts for the tax year. Last year, I spent ca. 3 hours
completing Form TD 90-22.1 for all these accounts and expect the new Form 8938 to
take at least just as long.
- If the proposed Form 8938 is passed, then I suggest removing the requirement to
also complete Form TD 90-22.1, or perhaps simply combine the two forms. On the
other hand, perhaps the Detroit office could forward copies of their completed TD 90
22.1 forms to the IRS in Washington DC?
Regards,
Alan Stubenrauch
(Social Security No.
60 Albury Road
Aberdeen AB 11 6TL
Scotland, UK
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FROM A CITIZEN WHO CARES: Form 8938
I can already state that the reporting burden of "information" only returns for small
business owners and individuals who do business overseas is overwhelming. The rules
are complex and contradictory and as an expert in this field, I can tell you that most CPAs
and IRS agents are entirely unqualified to help Americans with overseas lives and
interests. Most of us pay plenty of local taxes anyway, so the IRS just imposes
tremendous costs, for a really questionable benefit. The only way the IRS should be
allowed to implement this form is if the FBAR burden is eliminated....the amount of
duplicate information requested is ridiculous and you are punishing those of us who
comply while you already have enough rules and information to punish those who do
not...
Additionally, the President's dream of increasing exports will remain a dream as long as
the IRS continues to punish its citizens overseas and its small business owners who try to
do business overseas. The National Taxpayer Advocate has reported extensively on this
subject, which the IRS seems to ignore....Most large businesses now are implementing
policies against hiring Americans overseas (yes I know this for a fact because I work with
many of these international companies and their employees!!!)
If you take the average working hours per year is 2000 hours. An increase in 378,000
hours for one information only return is the cost of 190 working lives. Add in the
FBARs, the 5471 (which the National Taxpayer Advocate states can take up to 3 weeks
per company) and all the other info only returns and the IRS continues to fill its
computers with tons of information that will never be used. Cut out the waste first before
trying to implement new reporting requirements.
The IRS should be severely limited on what they can request which does not directly
increase the revenue of the United States Government. The theory of Mr. Shulman that
increased reporting leads to increased revenue is only a theory and the people who make
the rules are very ignorant of how the world operates outside the US borders. This
ignorance continues to cost us competitiveness in the world and is the reason why many
companies and individuals are now shunning the US for their operations and why many
investors are divesting of shares in US companies...
If the US acted like all the other DECO members and only taxed people on residency
instead of citizenship, the net benefit to society and to the US government would be so
much more than this current mess of a system.
As a small business owner I can now tell you that between compliance with Federal Tax
laws, the SEC, State laws, overseas laws, etc etc. over 70% of my business activity
results in either taxes paid or compliance....it is not worth growing my business any larger
and it is not possible to serve low and medium income clients....
You will regulate your agency into oblivion if you do not start simplifYing the reporting
requirements. The requesting of duplicate information by the government should be
expressly forbidden; if the FBAR is not sufficient for the IRS and the Department of
Treasury, and this form is used as a replacement, that is fine, but don't keep both, this is
not right and not fair. It is also not right and likely unconstitutional to treat overseas
Americans differently than Americans living in the US. Remember, the FBAR fines were
meant for drug dealers, terrorists and money launders, not ordinary Americans; add on
top of this laws that most tax lawyers and CPAs don't fully understand, how can you
reasonably expect people to have to comply with a system like this? This is shameful.
Then, when IRS "experienced" agents are sent for outreach (like two agents visiting
Geneva, Switzerland on December i h , 2010 from the IRS Paris office) and they give
such poor answers or can not answer simple questions, what a bad joke....this is an
embarrassment to the Service, to the Government and to our Country.
In short,
• The IRS should not implement this form unless the FBAR reporting requirement
is eliminated.
• Any duplicate information from the 5471 should not be required to be entered on
this form for people who own foreign companies.
• All Pension accounts or similar that are tax compliant in the country where they
are located should be eliminated from reporting. Local pension accounts should
not have to be Qualified by the IRS or be covered by a tax treaty to be eliminated
from this reporting requirement.
• All reporting whereby the individual is not the beneficial owner of the assets
should be eliminated. Current rules, like with the FBAR don't imagine that
Americans actually work in the accounts payable department of an overseas
employer.
• The $50,000 threshold is too low. Raise this to $250,000 or $500,000 and index it
to inflation and the value of the dollar index versus a basket of securities.
• No IRS penalties should be allowed if the account owner is in compliance with all
tax reporting in the jurisdiction where the account is held.
From a tax payer who cares and is tired of the IRS running ragged over its overseas
American citizens
127 Fortis Green Road
London N10 3LX
24 December 2010
Gerald Shields IRS
Room 6129
III Constitution Ave NW
Washington DC 20224
Dear Mr. Shields,
I am writing to comment on the proposed form 8938,-"Statement of Foreign Financial
Assets". I have downloaded a copy of it.
I do not believe the collection of information in this detail will be necessary for you to
find out about taxpayers' foreign assets. You already have a form collecting this
information, 90-22-1. That form, although not going into detail that is asked for in the
proposed 8938, provides the Agency with almost everything it needs to find out more
about foreign assets of a taxpayer. As I will describe below, there is a real problem in
asking for the detail you are proposing to ask for.
Your estimate of the burden of collection of information on the respondents is
extremely low. The detail requested in section B of stock or security issued by non-US
persons alone would take hours, especially if the respondents had to delve into
retirement funds to fmd out what securities were in there. Imagine all the different
holders of a large company like BP would have to go through! The same goes for your
section C, which could take hours to find out about and list leases, financing of
automobiles, and other simple financial instruments.
To maintain the efficiency you are seeking, I recommend deleting the entire sections B
and C from the proposed form.
As for the intent of section D, "Schedule of any interest in a foreign entity", there must
be a better wording for this. The same problem with holders of BP stock I alluded to
above arises. What you probably mean is "controlling interest" in a foreign entity. Then
you have to describe what controlling interest means in the instructions.
In conclusion, I do not think the form as you have proposed it will accomplish what you
are trying to do. On the contrary, it will submerge your agency in a mountain of forms
and data for the millions of Americans (not hundreds of thousands, as was erroneously
reported) holding such assets, cause the taxpayers millions of hours of extra work - all of
which could have been avoided by simply enhancing the existing data collection form
90-22-1.
Yours truly,
D. Hugh Rosenbaum, SS number
-_---------.!D~,~ ~
34. avenue de New York
75116 PARIS
FRANCE
Tel: 01 -17202415
Tel: International: [311J -17202415
FAX: 01 47 2416
FAX: International: [33IJ -1, 20 2410
email: aaromailiii'aaro-intl.org
Websitc:http://aaro-intl.org
ESTABLISHED 1973
December 20.2010
Mr. Gerald Shields
IRS, Room 6129
1111 Constitution Avenue, N.W.
Washington DC 20224
Reference: Draft Form 8938, "Statement of Foreign Financial Assets"
Dear Mr. Shields;
In response to your request for comments on the proposed form to be used to report
American citizens foreign financial assets, I submit the following:
a. the quote, "as part of its continuing effort to reduce paperwork and respondents
burden", I find it difficult to rationalize when we are asked to fill out another form that
may take an hour of the taxpayer's time. Add to that the number of people the IRS will
likely hire to implement this program and you have another monster.
b. You should have a cost vs. benefit analysis performed outside the IRS or the U.S.
Treasury Department. I read recently for every tax dollar collected there is a $1.60 of
government debt. It would seem a far better thing to start from zero on the thousands
of pages you have in your tax codes, closing those loop holes instead of picking on
American citizens living abroad to possibly gain more IRS revenue. That would seem
a lot more beneficial to all tax payers concerned .. If this form is implemented it can
only add new costs in our government operations that are not covered by significantly
increased revenues. It seems the information collected will have no practical utility.
c. In looking at the form, I can guarantee you have not left enough room to write in all the
information requested.
d. Since the form delivered did not include instructions, I cannot fully interpret the form.
For example, in Part A, what is the definition of a "financial institution"? In Part B.,
what is the definition of stock or security by class. issue and type? Why does it matter
what the maximum value is of the stock or security during the year? Last I heard,
capital gains are not taxable if you don't sell them. Why do you need that information?
Ditto for Part C. What is a "counter party". In Part 0, Foreign is misspelled in the last
column.
e. You have estimated the Time for the Respondent to fill out the form. One hour is not
enough for what you are asking. Also, what is the time required for an IRS employee
to review the information provided? Key to the cost of this program.
I would hope that Form 8398 and its Instructions are reviewed by the OMS or any other
auditor to perform a cost vs, benefits analysis as well as clearly defined questions asked for
in this document.
In November of 2010, the US Federal Register estimates that 350,000 persons will respond
to this form. It would be interesting to know what methodology was used for that number.
There are more that five million Americans living abroad. Did they use 5 million in
determining the net number of people? What was the source of their information?
Thank God I don't have $50,000 in a foreign bank account!
Sincerely
dh~~
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Don
son
Vice
sident
Association of Americans Living Overseas
Cc: Jack Lewis, Director, (OMS)
IRS
Gerald Shields Room 6129
Dear Mr. Shields,
I was dismayed to learn that I would need to fill in an additional form to complete my tax
return for 2011. I have lived and worked and paid taxes in France for over 25 years. I am a
US citizen and as such I also file taxes every year. My French tax return takes less than 2 hrs
to complete, fuid I can do it on line. My US tax return takes days to complete, as you must
find appropriate worksheets and compute numerous items - I always shake my head sadly and
laugh ruefully when I read about the reduction in paperwork act.
I have reviewlOlID 8938 in its draft form and have a few comments:
Part A is all information submitted to treasury on form TDF 90-22.1, does this mean we
won't have to file this form anymore? As doing it twice is not an appetising thought - it takes
a good hour to get all the information into the form.
Part B is already reported in schedule D for any stocks that were traded during the year. I
sincerely hope the US is not contemplating a tax like the French ISF which is a wealth tax
which examines all your holdings and takes a small percentage of it - if you read the french
news this is a major issue at the moment. Stocks are also held here at financial institutions
such that the accounts would be listed in part A, or TD F 90-22.1, and transactions on
Schedule D. So once again this is twice the reporting - this would be another 2 hrs at least if
each stock held needs to be reported individually and not globally in an account.
Part C I am at a loss at to what this reference to so I imagine I have no holdings in this area,
but again for someone who does have say insurance contracts this will take some time. Any
interest from these would already be reported on Schedule B - this will lead to confusion
should ~e ~eport twice'???
Part D This is already declared in Schedule E if real estate or trust, and Schedule C
business. So 'once again this is a repeat of e'xisting information.
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forffis~atch. when'will overseas tax payers be able to file on line?
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xxxxx -STATEMENT OF FOREIGN FINANCIAL ASSET~
Statement of Foreign Financial Assets >Attach OMB No. 1545-xxxx
DRAFT FORM
8938
Form
(Rev. July 2010) Depl.of
the Treasury Internal
Revenue Service
1--------
to your tax return if you owned specified foreign financial assets having an
aggregate value of more than $50,000.
>See separate Attachment
instructions.
Sequence No. XXX
Name(s) shown on your income tax return
Identifying number
Important: Fill in all applicable lines and schedules. All information must be in English. All amounts must be
stated in U.S. dollars unless otherwise indicated.
Complete Part A if you held any interest in any financial account maintained by a foreign financial institution
during the taxable year (see instructions), and
Complete Part B if you held any interest in any stock or security issued by a person other than a United States
person (see instructions), and
Complete Part C if you held any interest in any financial instrument or contract held for investment that has an
issuer or counterparty which is other than a United States person (see instructions), and
Complete Part D if you held any interest in a foreign entity (see instructions).
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account during
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From:
To:
Subject:
Date:
Terry Ralph M
Shields Gerald J; Tarris Virginia M;
FW: comments on burdens imposed by Form 8938 - Continued
Wednesday, December 29, 2010 9:57:30 AM
From: Norman Reuter [mailto:[email protected]]
Sent: Tuesday, December 28, 2010 1:00 PM
To: Terry Ralph M
Subject: comments on burdens imposed by Form 8938 - Continued
To Mr. Ralph M. Terry
For transmission to Mr. Gerald Shields
Dear Mr Terry,
This e-mail is a follow-up to my e-mail of yesterday evening (below).
I am sending you this e-mail in lieu of sending a paper copy, as discussed by
telephone yesterday. Thank you for your kind offer to transmit before the January 3
deadline my comments on the burdens imposed by Form 8938.
The below e-mail was sent last night your time, in the wee hours of the morning
Paris time, and I was not able to type a conclusion. I wish to do so now. Also, I
wish to clarify a couple of the points made in last night's below e-mail.
I sincerely hope that solutions to the electronic filing issues enumerated below will
or have already been implimented. Those solutions must permit the declaration of
a significant number of foreign assets. By significant, I would say at least 40 foreign
bank accounts in Part A of Form 8938 and innumerable, hundreds, of
individual securities in Part B.
As for Part C of Form 8938, I cannot comment because I do not have
much experience with unusual investment vehicles and am not even sure what you
are looking for except perhaps someone who sells on an installment plan, which I
have never seen in France. I would still provide ample space so as not to infringe
on electronic filing.
As for Part D, you certainly need more than two lines. I have several clients who
have multiple Forms 5471 and 8865. To be on the safe side, I would allow for
between 5 and 10 closely held entities per taxpayer.
I will be contacting my software developer as soon as I have confirmation form you
that electronic filing will be permitted. I would appreciate that you contact all
software developers and emphasize the importance of enhancing their software to
allow electronic filing of Form 8938 for U.S. taxpayers with significant holdings
overseas as indicated above. This is extremely important as the greatest obstacle
to electronic filing from overseas today is the software developers.
Lastly, in regard to electronic filing, I wish to emphasize what I said and indicated
below concerning the work I did to help bring about viable electronic filing from
overseas. This involved months of time over the years 2000 through 2004, time for
which I was paid nothing. After the IRS's promotion of electronic filing, the
investment of time I have made, and the importance of electronic filing to me today,
I trust that the IRS will not let me down.
I regard to the burdens imposed on taxpayers and tax return preparers as indicated
below, I wish to emphasize that the estimated completion time as indicated (one
hour and five minutes) is completely unrealistic. For the long term overseas
community of Americans with most or all of their assets overseas, think more in
terms of doubling or tripling the time for annual tax return preparation. And
overseas tax returns are complicated. The average tax return that I do takes a
day. Some take less and some take more. So the average tax return with Form
8938 could take two days. This will require a signifcant adjustment to how I run my
practice, and what I charge for a tax return.
Why was such an unrealistic completion time proposed, even at this stage for the
draft form? I can only presume that the employee responsible for this glich was
trying to please his superiors. I sincerely hope that the IRS will have the courage to
correct this administrative reflex so that in the end you will not simply be dumping
on me.
As I mentioned below, this lack of realism does not help compliance efforts on your
part, or on my part. Particularly on my part, as I am your compliance man in the
field. I am the one who has direct contact with each taxpayer every year. I have to
explain this new requirement to taxpayers, my clients, and sell them the importance
of complying, of doing it right and doing it well. How am I supposed to do this if you
are telling them that it should take one hour and I know from experience that it will
take eight hours? How will they feel about paying me for the extra time now that
you have planted doubts in their minds? Will they go to another preparer who has
less qualms about doing it right and doing it well? This last is rather easy. How do
you prove "knew or should have known" against a preparer, especially when we are
dealing with foreign assets in a foreign culture in which IRS personnel are pretty
much helpless.
Generally, I find the Form 8938 redundant and inefective as well as being extremely
burdensome (as I mentioned below, it will be like having to do an estate tax return
every year along with your income tax return). It is redundant because you already
have the foreign bank account form (the TD F 90-22.1), and Forms 5471, 8865,
6252 and 3520. It is ineffective because people who are cheating or terrorists are
simply not going to file it, the same way they already don't file anything. And in that
way, it is unfair because it justs puts a significantly greater burden on those who are
already complying.
But if Congress mandated it, then I guess we're stuck with it, and as mentioned
above, it will mean a significant change in the way overseas return preparers
organize their practice. I will be immensely grateful if you take into account my
comments. I will also be greatful if you let me know at this time your plans vis-a-vis
electronic filing with Form 8938.
With my very best regards,
Norman Reuter
PTIN: P00155590
Telephone direct dial: 011 33 1 47 05 01 52
Fax direct: 011 33 1 47 05 56 48
1 rue de Villersexel
75007 PARIS, FRANCE
----- Original Message ----From: Norman Reuter
To: [email protected]
Sent: Tuesday, December 28, 2010 3:08 AM
Subject: comments on burdens imposed by Form 8938
To Mr. Ralph M. Terry
For transmission to Mr. Gerald Shields
Dear Mr Terry,
I am sending you this e-mail in lieu of sending a paper copy, as discussed by
telephone earlier today. Thank you for your kind offer to transmit before the
January 3 deadline my comments on the burdens imposed by Form 8938.
I am a tax return preparer in Paris France. I have been working as such for over 20
years, serving the middle and lower income American community in France. I am
an attorney (California and Paris bars) with an LLM (tax). I became a tax return
preparer because I wanted to stay in Paris, and tax return preparation was
the niche available. I have my own firm since November 1992.
I see considerable burdens asociated with Form 8938, both from the point of view of
the taxpayer, and also from the point of view of the tax return preparer.
Almost all my clients are U.S. citizens and long term residents of France. Many are
married to French spouses. Their lives are here, and consequently, they have
many bank accounts here where they live. This is aggravated by the fact that
French banks tend to be very aggressive, and prompt one to open as many
different accounts as possible. One who is not well versed in money matters and
lends their confidence to a French banker, generally ends up with a dozen (or
dozens) of accounts, many of which the client does not truly understand their
functioning.
I have experience declaring assets in two contexts, one being the foreign bank
account form, i.e., the U.S. Treasury Form TD F 90-22.1, and the other being
French wealth tax returns. I also do estate tax returns from time to time.
Before January 1, 2009, the Form TD F 90-22.1 had a very broad check the box
line as to the value of each account: under $10 000, $10 000 to $100 000, $100
000 to one million, etc. After December 31, 2008, the form has required the exact
highest amount in each account during the year. For many people, this has turned
what was originally an hour or two compliance requirement into something which
could take more than a day, searching for and then through monthly statements for
more than a dozen accounts, calling the bank for missing information, etc.
On a French wealth tax return, one basically must list assets in detail, with account
numbers for bank accounts, values at the end of the year, etc. In principle, one
must list each security held in securities accounts, similar to the requirement in Part
B of Form 8938. I know from experience that this is extremely time consuming, and
generally I ask the clients to do it themselves if possible. It will of course be more
time consuming if the taxpayer must list not simply the asset values at the end of
the year, but the maximum values at any time during the year.
It is evident from the form that taxpayers must declare assets other than bank
and financial accounts at foreign institutions. For example, Part D requires
declaration of interests in foreign entities. The estimated time given for preparation
of Form 8938 is one hour and five minutes. How is one supposed to declare all the
above details about holdings in foreign financial institutions and evaluate a closely
held business in one hour and five minutes?
I understand the problems Congress and the IRS face concerning compliance. On
top of that, I am a patriot and my country is at war. That being said, to anticipate
that the detailed declaration of one's assets (my clients are long term residents with
their assets over here) will take one hour and five minutes shows a draconian
disregard and disrespect. It does not help compliance efforts on your part or on my
part, and it was absolutely unnecessary. The IRS has experience in this regard
concerning estate tax returns and the time it takes to prepare them accurately.
As for the tax return preparer, I have a number of questions. Since Form 8938
must be attached to the income tax return, what will be my level of responsibility
regarding the items declared on the 8938? I already have a responsibility to make
sure all revenue which I know about, or have reason to know about, is declared on
the 1040. If I now will have the same reponsibility regarding the assets and their
values, it will be like doing an estate tax return every year in addition to the income
tax return. This will multiply the time of annual tax return preparation by two or
three, depending on the client!
Tax year 2000 was the first year the IRS electronic system accepted foreign
addresses. There was an IRS town meeting in London (the first ever outside the U.
S.) to introduce the overseas tax preparer community to electronic filing. I attended
that meeting and started trying to file electronically, somewhat desperately I must
say. Returns overseas are complicated returns. And as I mentioned above, my
clientele is the middle and low income community. That's where most returns come
from. Contrary to popular belief, most Americans in France are not wealthy. You
can only bill these people so much, and I was desperately trying to make my
practice viable.
Due to continued limitations in the IRS system, in particular concering the special
rules for foreign spouses, and tax software limitations concerning foreign
addresses, I could only file one or two returns electronically every year for several
years. Even after I changed software and had worked with the software engineers
to upgrade their system, I was still limited by the IRS system. Then one day the
then head of ETA responded to one of my e-mails and put me in touch with a an
IRS employee in ETA who had international experience and understood what I was
talking about. Together we started working on the foreign spouse issues and he
requested the necessary enhancements of the IRS electronic filing system. In the
process, Publication 501 was also modified to more clearly address the rules
concerning foreign spouses. And from that time on, I believe it was 2004, filing
electronically from overseas became economically viable.
So, what is the scope of this new form vis-a-vis electronic filing? What with the
exchange rate as it has been, most people, even middle income people, will have
$50 000 in assets outside the U.S. (the exchange rate has nothing to do with the
cost of living). Most Americans overseas will have to file the 8938. Will I be able to
file their returns electronically? Or are you going to put me out of business after all
these years of struggle? Part A of the form has room for four accounts. This is
rediculous. How many accounts do you and your family have in the U.S.?
Americans who live here, have their life here, and they end up quite naturally with
all kinds of accounts where they live, just like Americans who live in the U.S. (joint
accounts with their spouse, custodial accounts for their minor children, power of
attorney over accounts of aged relatives, business accounts if they have a business
like me, blocked accounts to guarantee payment of rent, not to
mention personal savings and checking accounts, etc.). Is there going to be a
limitation on the number of foreign accounts and assets one can have and still efile?
I sincerely hope that solutions to the above issues will be implemented before we
are required to file Form 8938.
With my very best regards,
Norman Reuter
PTIN: P00155590
Telephone direct dial: 011 33 1 47 05 01 52
Fax direct: 011 33 1 47 05 56 48
1 rue de Villersexel
75007 PARIS, FRANCE
From:
To:
Subject:
Date:
Terry Ralph M
Shields Gerald J; Tarris Virginia M;
FW: Draft form 8938 -- please forward to Mr. Shields
Tuesday, January 04, 2011 8:59:31 AM
From: kimberly buckley [mailto:[email protected]]
Sent: Tuesday, January 04, 2011 6:01 AM
To: Terry Ralph M
Subject: Draft form 8938 -- please forward to Mr. Shields
Dear Mr Terry,
Please forward this comment to Mr. Shields.
Dear Mr. Shields,
In regards to Draft form 8938: Please be aware that US citizens living
overseas often have joint accounts with their non-US spouses. This form
would then require disclosure of accounts to the US government by non-US
citizens. This adds a layer of complexity to a form that is already confusing.
Would I disclose how much I contibuted to the account, or the whole amount.
Please keep in mind many ex-pats are non-working spouses. If we can not
maintain joint accounts with our spouses due to the US tax burdens and
forms, it makes our financial situation very precarious.
Please reconsider. How is this form necessary? Is there a way to exclude expatriate Americans? The US tax system is burdensome (paying tax in both
countries) to us here as it is.
Best Regards and Good Luck,
Kimberly Opdam
From:
To:
Subject:
Date:
Terry Ralph M
Shields Gerald J; Tarris Virginia M;
FW: Form 8938 Statement of Foreign Financial Assets
Wednesday, January 05, 2011 4:45:35 PM
From: Sally Warren [mailto:[email protected]]
Sent: Monday, January 03, 2011 10:53 AM
To: Terry Ralph M
Subject: Re: Form 8938 Statement of Foreign Financial Assets
Dear Mr. Terry,
I offer the following comments on proposed Form 8938 of Foreign Financial Assets:
1. Part A appears to request the same information as required by the existing Treasury Form. It is a little difficult
to track the maximum value of a savings account that does not provide regular statements; however, this is a
minor point compared to Part B.
2. Schedule of any stock or security issued by a person other than a U.S. person - name, address, description of
stock or security by class, issue and type, maximum value during taxable year. In the case where one's funds are
under management, one does not have regular access to all the requested information. As part of my reason for
having funds managed is to save myself the time involved in managing the a/c myself, this request would
be burdensome especially in the case of an actively traded account. And, in due course, it would undoubtedly lead
to increased fees from brokerages / investment managers who would ultimately have to provide the
requested information.
3. Setting "the aggregate value at more than $50,000" does not strike me as the best approach. It might be better to
set an individual holding limit or raise the aggregate amount.
4. Whereas the existing Treasury Form is required of anyone having signature authority over a foreign bank
account, which in most cases would be expatriates, the new form appears to require anyone whether expatriate or
not to complete the form. I believe it should be required of anyone with foreign assets, otherwise it would
discriminate against expatriates. Most U.S. expatriates I know keep their investments in U.S. markets. In a
global world, this form seems to be trying to get Americans to keep their assets in the U.S. domestic markets.
That would be foolish from an investment point of view with an eye on diversification.
5. It is not clear to me what the aim of tracking such information is. I would rather the U.S. close a loop hole I see
in Social Security payments - spousal payments to non-Americans married to Americans in the case where
the American files singly (not jointly) to avoid declaring the spouse's income. I do no myself like having my
tax dollars go to making payments to husbands of friends who have never contributed to the U.S. Social
Security System and who have never paid a $1.00 of tax to the U.S. At a minimum, for such non-American spouses
to qualify for spousal social security payments, there should be a pre-requisite that the American and nonAmerican spouse file a 1040 jointly.
Sally Warren
On 15 déc. 10, at 21:48, Terry Ralph M wrote:
Ms. Warren,
In response to your request we are providing you with a link to the Form that was submitted as part of the Proposed
Collection. The link below will download a PDF of the Form 8938.
http://www.reginfo.gov/public/do/DownloadDocument?documentID=202248&version=1
Thanks
Ralph M. Terry
Tax Analyst, Tax Forms and Publications
Special Products Section
202 622 8144 | SE:W:CAR:MP:T:T:SP | Internal Revenue Service | OMB Unit
-----Original Message----From: Sally Warren [mailto:[email protected]]
| 1111 Constitution Ave, NW, Washington, DC 20224 | Room 6129
Sent: Tuesday, December 14, 2010 3:48 PM
To: Terry Ralph M
Subject: Form 8938 Statement of Foreign Financial Assets
Importance: High
Dear Mr. Terry,
Please send me a copy of the subject draft form.
comment on it prior to January 3, 2011.
Thank you.
Sally Warren
I should like to
From:
To:
Subject:
Date:
Terry Ralph M
Shields Gerald J; Tarris Virginia M;
FW: Tax reporting burden 8938
Wednesday, January 05, 2011 4:42:38 PM
-----Original Message----From: MNSenzyme [mailto:[email protected]]
Sent: Monday, January 03, 2011 6:44 AM
To: Terry Ralph M; 'Gerald'; [email protected]
Subject: Tax reporting burden 8938
Dear Mr. Terry,
Dear Mr. Shields,
I am an American Women's Club member living in Germany. The new reporting
requirements are an incredible additional burden. Since I was able to find a
tax consultant who was keeping up to date with all of this ( which in itself
took many weeks of searching), I have spent more than $100,000 in the last
year and a half on tax consultant advice & help with all of the new rules &
forms you all are concocting to catch ' tax fugitives'. This is almost more
than my income, which is only dividends & interest! And is also way beyond
what is reasonable considering the low amounts of investments ( and
resulting interest & dividends) I have for my three American children. It
feels like we are being punished for saving for them. In any case, we are
being punished for living abroad.
Your rules are worsening the economic safety of many American wives of
foreign nationals since these men no longer want to give their wives signing
powers over joint accounts, endangering their long term economic security.
Several women I know have lost the kinds of joint signing powers that are
normal & practical in an 'American' marriage.
Living abroad , one needs a local bank. But these local banks are refusing
to work on American citizen accounts. I spent the past three years looking
for someone to manage some investments and had to cross at least 10
institutions off the list because they no longer will work for an American
citizen. My daughter, with her small savings, has had the same difficulty.
My checking account bank here only keeps the account because they have had
it for so long. I have had to move the brokerage business because the
brokerage considered the new US reporting requirements AND the investment
restrictions to difficult to implement.( NO ETFs or mutual funds, etc since
they are considered PFICS) The many hours of research , interviews & follow
up required just to do normal banking has already become a huge burden on
many ' normal' average Americans overseas. The tax reporting is becoming an
expensive nightmare well beyond your 'time to fill out' estimates.
Worst of all, we are being discriminated against for choosing to live
abroad- a scandal, considering that we are some of the country's most
staunch and effective ambassadors.
Just because an American lives overseas, they should not be suspected
guilty until proven innocent. The same reporting rules should apply to all
Americans regardless of where they live. You do not ask in country living
citizens for total net worth information. They do not have to send lists of
highest balances on each their accounts. It is appalling, timeconsuming, &
expensive, and putting Americans overseas at great disadvantage.
Short compliance deadlines have exasserbated the expense & confusion. The
short timeframe for comments on 8938 ( over the holidays when people should
be spending time with their families)seem set to discourage comments.
Please send me a draft of the document by email immediately
Please reconsider the necessity & fairness of these new requirements.
Best regards,
Margaret Nelson Spethmann
Hochallee 89
D - 20149 Hamburg
Germany
Tel.: +49 (0) 40 - 460 70 313
Fax.: +49 (0) 40 - 460 70 314
Mobile:+49 (0) 172 970 1336
E-Mail: [email protected]
E-Mail: [email protected]
Howard M. Liebman
30 avenue de Boetendael
1180 Brussels
Belgium
December 23,2010
Mr. Gerald Shields
U.S. Internal Revenue Service
Room 6129
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
U.S.A.
Proposed IRS Form 8938
Re:
Dear Mr. Shields:
I am writing in response to the kind request of the Internal Revenue Service for comments on
its draft of a new tax form 8938. I have obtained a copy of this form and, as a U.S. citizen
resident abroad, I took great interest in reviewing it.
As per your invitation, my comments are as follows:
(i)
First of all, I think that it is a good idea that you have used larger-sized boxes
in Part A. I have always had problems in completing Form TD 90.22-1
because some of the boxes are too small.
That being said, I wonder if the information in Part A is not redundant to what
we already have to report. It may not be all that good an idea to require
essentially duplicative reporting.
(ii)
Reporting ownership of stock and securities is also potentially redundant. If
an individual owns a substantial amount of privately-traded securities, then the
entity in which the securities are held would presumably be a "controlled
foreign corporation", triggering reporting on IRS Form 5471.
Taxpayers are also already required to report foreign-source dividends and
capital gains, whether from publicly-traded or private corporations.
(iii)
The scope of Part C is not clear. The term, "contract", is especially broad.
Presumably, you are trying to get at financial contracts such as swaps, options
or derivatives.
If so, this should be better explained and delimited.
Obviously, there will be quite some difficulty in obtaining valuations for
various investments which are not otherwise publicly traded. This will be
time-consuming and potentially unduly burdensome, let alone expensive for
the taxpayers involved.
,
(iv)
What is the difference between Schedule D and Schedule B? Certainly, if
someone owns stock or security in a person other than a "U.S. person", that
shoulJ also constitute a "interest in a foreign entity". Shouldn't you eliminate
this redundancy? Perhaps you were trying to get solely at foreign partnerships
or trusts?
(v)
Although the draft form appli...s to "specified foreign financial assets having
an aggregate value of more than $ 50,000", the result is that it can also apply
to interests with a very small amount at stake, as long as everything taken
together exceeds the $ 50,000 limit. This can also be triggered solely by
exchange rate fluctuations. Perhaps consideration should be given to setting a
de minimis limit of $ 10,000, this time for each interest to be reported on.
(vi)
Clearly, any individual living overseas will have one or more bank accounts
and may invest in several types of securities in the country where they live or
elsewhere (if only for purposes of spreading out asset allocations and hence
risk). Thus, the burden of this new form should not be underestimated. It will
certainly take several hours to pull together the information, and perhaps even
more if research is required into the highest valuation for the year.
Thank you very much for your attention to these comments.
Sincerely,
DEPARTMENT OF THE TREASURY
IHT
RNAL REVEHUE SERVICE
ATLANTA, Gil. 30308
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Ms, Jane A. Bruno, J. D.
1082 Vintner Boulevard
Palm Beach Gardens, FL 3341 U
Dear Ms. Bruno:
I am responding to your inquiry dated February 2, 2011, to the Commissioner of the
Internal Revenue Service, Douglas H. Shulman. You provided comments concerning
Form 8938, Statement of Foreign Financial Assets.
I am forwarding your correspondence to the Assistant Secretary of the Treasury for
Tax Policy who develops and reviews policy, legislation, regulations, revenue rulings,
revenue procedures, and other published guidance dealing with all aspects of federal
income tax law.
Your correspondence will be brought to the attention of the appropriate officials for
consideration during the Office's discussions of the issue or as part of an ongoing
review of federal tax law. However, extraordinary workloads and limited resources
often preclude substantive responses to, or even acknOWledgement of, your letter.
Thank you for your comments. If you need further assistance, please call me at
(267) 941-4669 or Ms. Worner, Identification Number 0530024760, at
(267) 941-4651.
Sincerely,
Iw4r
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Jane A. Bruno, J.D.
1082 Vintner Blvd.
Received by the
Palm Beach Gardens, FL 33410 CommIssioner'. C0l1'88pondence
Qfflce
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(561) 222-9273
FAX: (561) 429·4526
fEB 092011
February 2, 2011
Dear Commissioner Shulman:
I have been a tax practitioner for over 20 years, serving mostly Americans living
overseas. During that time I have worlc:ed with countless people trying to make a Hving
and raise a family in very different surroundings from that of most Americans who have
never lived abroad. Virtually every client I have worked with sincerely wants to satisfy
his or her US tax obligation, even though few will use services or receive benefits from
the United States government. That is why I am enormously troubled by the new tax
form 8938, Statement of Foreign Financial Assets.
In my view, this form takes everything that is wrong with Treasury Form 90-22.1, Report of
Foreign Bank and Financial Accounts (FBAR). and makes it much worse. I have already
commented to the Commissioner of the IRS, the President. the Secretary of Treasury
and a number of Congressmerr-none of whom bothered to respond--on the FBAR.
However, I believe it is worthwhile to re-visit those comments in the context of this new
form.
(I} Confusing and overwhelming-It is widely acknowledged that the FBAR and
accompanying instructions are difficult to understand and harder to comply
with--which accounts need to be reported, how does one get a "maximum"
value for the year, etc. Many tax preparers are not comfortable offering advice
because, even as professionals. they are not really sure what is included or not
especially when it comes to foreign retirement accounts and pension plans.
And now comes Form 8938 that requires information if the taxpayer has any
interest in a foreign financial account, a foreign stock or security, a foreign
financial instrument or a foreign entity. This covers virtually every possible
financial interest anyone could have-whether there is a present interest or not
and whether the taxpayer could actually access the funds or not (as with
retirement plans). AND it is in addition to TDF 90-22.1 so not only is there a
duplication of effort, but it is not clear how much overlap there is or if the forms
are looking for different things. I would note that as I write this the instructions for
the form have not been released (it is February), even though it has been
published that the form is required to be filed for the 2010 tax year. This is
irresponsible and unfair to the taxpayers.
(2) Intrusive and out of the scope of duties- What makes this form even more
troublesome is that the IRS (and Congress) don't even pretend this is about
collecting revenue. The form requires only that financial information be given -it
is not a form to report taxable income. It has always been my understanding
that the purpose of the Internal Revenue Service is to collect tax on reported
income-not to start collecting financial details and then investigating whether
the proper amount of income has been reported. Even on its face it is unrealistic
to think that conclusions about the veracity of income reported can be gleaned
from knowing the highest balance in a given account. It is entirely possible that
a taxpayer could move money through an account-for example from a
savings account for a child's college fees to a checking account to pay those
fees-without actually earning any income on those monies. But this form, that
has to be attached to the taxpayer's return, may give the impression the
taxpayer has a large amount of funds when really he has moved money through
different accounts-for reasons that are not the business of the IRS. A taxpayer
living in the US is not asked these questions. What justifies asking them of
Americans living overseas?
(3) Penalties-Several of my clients are finding out the hard way about what it
meant to join the "Voluntary Compliance" program initiated a couple of years
ago so taxpayers could "come clean" on not filing the FBAR. One client, who
had no idea she even needed to file the FBAR because she had been living in
Africa, has now paid a UK firm nearty half a year's salary in fees to represent
her--and has not even gotten the bill yet from Treasury for her penalty. This type
of scenario is occurring over and over as taxpayers finally hear about the filing
requirements, try to do the right thing, and get burdened with large fees for
professional advice and IRS penalties. It is creating not only financial, but
emotional havoc. These penalties cannot motivate taxpayers to do something
they didn't even know they had to do-so theironty function is to punish
taxpayers for NOT doing that something-long after the fact. It is a sorry state of
affairs when the United states cannot collect enough money to operate without
resorting to fear tactics and punishment of a sector of the American population
that has little voice or representation by virtue of living outside our borders.
I will close with the following comments:
•
Most Americans living overseas are just making a living and are NOT trying to
keep taxable income from the reach of the IRS by hiding it in foreign bank
accounts.
• For those Americans who set out to evade tax in this way the Treasury
Department should explore other ways of finding and punishing them besides
this heavy-handed approach that impacts too many innocent taxpayers. It is
not unlike punishing the whole class because one kid was caught cheating.
• More effort should be made to educate Americans overseas about their tax
filing obligations-perhaps re-open some of the overseas IRS offices or otherwise
make the rules more available.
• Finally. if information gathering is now the new role of the IRS, then make the form
AND instructions clear and concise enough that the average taxpayer can
comply-LISTEN to the comments of American Citizens Abroad, the New York Bar
Association, and all the other organizations and individuals that have put huge
amounts of time and effort into proposing ways to improve this process.
Thank you for your attention to my concerns.
Sincerely,
~~
~ne Br~o
I
I
December 26,2010
Gerald Shields
Internal Revenue Service
Room 6129
1111 Constitution Avenue, NW
Washington, DC 20224
RE: Comments on Form 8938 Statement of Foreign Financial Assets
Dear Mr. Shields:
Allow me to comment on Form 8938 Statement of Foreign Financial Assets from a practical
viewpoint. This form is unnecessary and an extreme burden to the taxpayer. This form will not
reduce paperwork or reduce the respondent burden. Form 8938 duplicates, for the most part,
information available elsewhere. It will not be a revenue generator but represents an economic
cost to both the IRS and the taxpayers. The 1 hour 05 minute time per respondent is completely
unrealistic.
Please note that my comments are limited by the unavailability of instructions for Form 8938.
Form 8938 Part A - Schedule of any financial asset maintained by a foreign financial
institution
This information is already available through Form TD F 90-22.1 Report of Foreign Bank
Accounts. May I suggest you allow Form TD F 90-22.1 to be part of the related tax form (1040,
1120 etc) and to benefit from extensions for those forms?
Form 8938 Part B - Schedule of any stock or security issue issued by a person other than
a U.S. person
I do not live overseas but as part of my diversified portfolio I have one account with international
stocks with an aggregate value in excess of the Form 8938 reporting threshold of $50,000. I
have 33 different holdings in that account, and Form 8938 asks me to list the maximum value of
each stock during the year. I may also have foreign stocks in my other accounts, or as part of my
retirement plans. It certainly would take me more than an hour to determine the maximum value
during the year on each and every foreign stock. I may not even be aware which stocks in other
parts of my portfolio are foreign. My stocks are held by a US brokerage firm which issues me a
1099. My understanding is that foreign institutions with US investors will also be required to issue
a 1099 under FATCA. The reach of this reporting requirement via Form 8938 is far greater than
the 378,000 respondents you anticipate, and I believe, unnecessary.
•
Gerald Shields IRS
RE: Form 8938
12/27/2010
Form 8938 Part C - Schedule of any other instrument, contract or interest
Without instructions it is unclear what is to be included in this section.
Form 8938 - Part 0 - Schedule of any interest in a foreign entity
This information reporting requirement for foreign entities is already covered by Forms 5471
(foreign corporations), 8865 (foreign partnerships), 8858 (foreign disregarded entities) and 3520
(foreign trusts). For Form 8938 how is "any interest in a foreign entity" defined? What particularly
concerns me is the requirement to report the maximum value of the interest in the foreign entity.
Many private companies, domestic and foreign, do not evaluate the fair market value of their
entity on an ongoing basis. How is the "value of the interest" to be defined? Book value? Fair
market value? Discounts for minority interest? Other relevant information is already available
through the forms cited above for reporting on foreign entities and any additional information
would not result in more tax revenue.
Conclusion
IRC 6038D(h} gives the IRS authority to issue regulations necessary to carry out the intent of IRC
60380. I hope that the conclusion by the IRS is that Form 8938 is unnecessary. However, if the
IRS wishes to proceed with Form 8938 I would suggest an extension of the comment period to
late summer 2011 with draft instructions provided in advance of the comment deadline. Please
do not hesitate to contact me regarding my comments on Form 8938.
Sincerely,
~I!~i-~ r!~ {/f
Katherine T. Leonard, CPA
Partner
I
I
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
December 26,2010
Gerald Shields
Internal Revenue Service
Room 6129
1111 Constitution Avenue, NW
Washington, DC 20224
RE: Comments on Form 8938 Statement of Foreign Financial Assets
Dear Mr. Shields:
Allow me to comment on Form 8938 Statement of Foreign Financial Assets from a practical
viewpoint. This form is unnecessary and an extreme burden to the taxpayer. This form will not
reduce paperwork or reduce the respondent burden. Form 8938 duplicates, for the most part,
information available elsewhere. It will not be a revenue generator but represents an economic
cost to both the IRS and the taxpayers. The 1 hour 05 minute time per respondent is completely
unrealistic.
Please note that my comments are limited by the unavailability of instructions for Form 8938.
Form 8938 Part A - Schedule of any financial asset maintained by a foreign financial
institution
This information is already available through Form TD F 90-22.1 Report of Foreign Bank
Accounts. May I suggest you allow Form TD F 90-22.1 to be part of the related tax form (1040,
1120 etc) and to benefit from extensions for those forms?
Form 8938 Part B - Schedule of any stock or security issue issued by a person other than
a U.S. person
I do not live overseas but as part of my diversified portfolio I have one account with international
stocks with an aggregate value in excess of the Form 8938 reporting threshold of $50,000. I
have 33 different holdings in that account, and Form 8938 asks me to list the maximum value of
each stock during the year. I may also have foreign stocks in my other accounts, or as part of my
retirement plans. It certainly would take me more than an hour to determine the maximum value
during the year on each and every foreign stock. I may not even be aware which stocks in other
parts of my portfolio are foreign. My stocks are held by a US brokerage firm which issues me a
1099. My understanding is that foreign institutions with US investors will also be required to issue
a 1099 under FATCA. The reach of this reporting requirement via Form 8938 is far greater than
the 378,000 respondents you anticipate, and I believe, unnecessary.
Gerald Shields IRS
RE: Form 8938
12/27/2010
Form 8938 Part C - Schedule of any other instrument, contract or interest
Without instructions it is unclear what is to be included in this section.
Form 8938 - Part D - Schedule of any interest in a foreign entity
This information reporting requirement for foreign entities is already covered by Forms 5471
(foreign corporations), 8865 (foreign partnerships), 8858 (foreign disregarded entities) and 3520
(foreign trusts). For Form 8938 how is "any interest in a foreign entity" defined? What particularly
concerns me is the requirement to report the maximum value of the interest in the foreign entity.
Many private companies, domestic and foreign, do not evaluate the fair market value of their
entity on an ongoing basis. How is the "value of the interest" to be defined? Book value? Fair
market value? Discounts for minority interest? Other relevant information is already available
through the forms cited above for reporting on foreign entities and any additional information
would not result in more tax revenue.
Conclusion
IRC 6038D(h) gives the IRS authority to issue regulations necessary to carry out the intent of IRC
60380. I hope that the conclusion by the IRS is that Form 8938 is unnecessary. However, if the
IRS wishes to proceed with Form 8938 I would suggest an extension of the comment period to
late summer 2011 with draft instructions provided in advance of the comment deadline. Please
do not hesitate to contact me regarding my comments on Form 8938.
Sincerely,
~!I~~~ 1 /0V1 t,J
Katherine T. Leonard, CPA
Partner
Page 1 of 2
Terry Ralph M
From:
kimberly buckley [[email protected]]
Sent:
Tuesday, January 04, 2011 6:01 AM
To:
Terry Ralph M
Subject: Draft form 8938 -- please forward to Mr. Shields
Dear Mr Terry,
Please forward this comment to Mr. Shields.
Dear Mr. Shields,
In regards to Draft form 8938: Please be aware that US citizens living overseas
often have joint accounts with their non-US spouses. This form would then
require disclosure of accounts to the US government by non-US citizens. This
adds a layer of complexity to a form that is already confusing. Would I disclose
how much I contibuted to the account, or the whole amount.
Please keep in mind many ex-pats are non-working spouses. If we can not
maintain joint accounts with our spouses due to the US tax burdens and forms, it
makes our financial situation very precarious.
1/19/2011
Page 2 of 2
Please reconsider. How is this form necessary? Is there a way to exclude expatriate Americans? The US tax system is burdensome (paying tax in both
countries) to us here as it is.
Best Regards and Good Luck,
Kimberly Opdam
1/19/2011
7 Station Passage,
South Woodford,
London, E18 1JL
Tel: 02089890088
Fax: 020 8989 5527
[email protected]
29 December 2010
Gerald Shields
IRS
Room 6129
1111 Constitution Avenue NW
Washington DC 20224
USA
Re:
Proposed Form 8938
Dear Mr. Shields,
I write to you with three hats on, that of a US taxpayer living abroad, that of an Enrolled "\gent
representing other US taxpayers living abroad, and as a representative of the Association of
Independent Expatriate Tax Practitioners (AIETP). I am also active in the N"-\EA Government
Relations Committee, and have cc'd a copy of this letter to N.-\K-\'s Bob Kerr for his
consideration in NAEA's official response.
The form in its current incarnation will have many problems in compliance. There is also the
matter of duplication of effort which does not make any sense.
Starting at the top of the form:
1) The initlal information section is basically acceptable, except:
a. ""-\11 information must be in English."
1. The lack of sensitivity for Spanish speaking taxpayers, especially when
so many taxpayers have assets in Mexico, is appalling.
ll.
It is not clear whether names of assets such as Banco de Espania must
be translated. This should be made clear.
2) Section A seems relatively straightforward, and not too difficult for the typical taxpayer
having access to funds offshore.
a. It appears however to duplicate information required on Form TD F 90-22.1.
This is excessive duplication. i\S the information is being reported to the
Secretary of the Treasury on two different forms, then one or the other is
unnecessary duplication of effort and one or the other should be abolished
immediately.
3) Section B is duplicating information in Section A
a. In section i\, one would list one's offshore securities account.
b. Then, in Section B, one appears to be required to list each asset within the
securities account.
i. This will confuse most taxpayers.
ii. There is no way to link any of the assets in Section B to their respective
accounts in Section A
4) Section B requires the highest value the asset attained during the calendar year.
a. Obtaining the value of a typical small business owner's offshore company (for
example, my own company British American Tax), will be expensive and time
consum1Ilg.
British American Tax IS the trading name of American Tax UK Ltd. American Tax UK Ltd. is registered in England No. 563M971.
VAT Rq,~stration No. M67 7436 71. Registered offKe M[iorest View, London Ell 3AP.
..
Business valuation experts charge between 1% and S% of the final
valuation, and can take months to give a final report.
11. Obtaining an annual valuation will be a costly and time consuming
outlay.
ill. Because the US owner of a US unlisted corporation does not face this
burden annually, this is inequitable.
b. Many people who work receive shares in company stock as part of their
compensation package. If the company is an offshore entity and is unlisted,
minority US shareholders will not have enough influence to demand an annual
valuation.
1.
This will reduce competitiveness and compensation for Americans as
some will opt out of receiving stock and some companies will no longer
offer stock options to American employees.
c. For a portfolio holder with a typical well-diversified portfolio, obtaining the
highest value during the year for each offshore entity held within their portfolio
will be difficult at best.
i. US brokerage houses are not set up to provide this type of information.
ii. Neither are offshore brokerage houses.
d. It is unclear whether }.. DRs should be listed here. They should be specifically
excluded in the instructions.
e. We feel it would be fairer to list the average value or the year-end and/or sale
value.
Section C requires maximum value of "any other instrument, contract, or interest."
a. We have been told that this would include offshore rental properties.
i. Asking taxpayers to obtain a valuation of their property annually will be
a great cost to taxpayers with no tangible benefit to either the taxpayer
or to the IRS.
11. It will take weeks to obtain a professional valuation.
ill. Because the owner of US real estate does not face this burden annually,
this is inequitable.
b. It is unclear just exactly what accounts and assets must be listed.
i. Is an offshore employer pension plan required to be listed?
1. If yes, is it still required to be listed if it counts as a US pension
plan under an income tax treaty with the US?
11. /ue normal insurance policies such as auto insurance, home insurance,
etc. to be listed?
One hour to compile all the data is unrealistic.
a. For people with an asset requiring a valuation, it will take weeks and hundreds
of dollars to obtain valuations for rental real estate and unlisted offshore entities.
b. For people with stock portfolios, I estimate it will take an average of 1S minutes
per asset to research the his torical values online. I t takes longer than a US asset
because many foreign listings do not have the easily searchable databases that
NYSE and NASDAQ have. A typical well-diversified portfolio will have twenty
investments. The total time estimate should therefore be much longer.
1.
S)
6)
Cc: Rob Kerr, NI\EA GRC
17 December 2010, Paris, FRANCE
Gerald Shields,
IRS, Room 6129,
1111 Constitution Avenue, NW,
Washington DC 20224
USA
Re
New Proposed IRS form SOFFA N°8938
Dear Sir,
We members of AARO have been asked to give our opinion on the above mentioned new IRS
form.
I do not really see the point of this new form since we already fill out the ID-F 90-22.1
Report of Foreign Bank and Financial Account form.
We Americans who reside outside the country do so mostly for reasons related to
employment. This is where the job is! Had there been jobs at home, we would have stayed
home. Furthermore, headhunters looked for us - we didn't look for them!
I feel that all this paperwork is a way of punishing citizens for having moved outside the
country. Why must we be punished for living & working outside the country?
We are faithful patriotic Americans who pay our income taxes every year, vote for president
etc - you can check it out! - and I feel it is unfair to be burdened with more paperwork.
This in spite of the fact that we are NOT represented in Congress. We fought our
revolutionary war based on taxation without representation!! Well, we're not represented in
Congress and yet we are good and responsible and we pay our taxes each year. Why must we
be further punished with more paperwork?
It has become so complicated to fill out the IRS forms that we have for the past ten years
hired a tax attorney to fill out the paperwork on our behalf
One more form to fill out will only give this tax attorney one more excuse to increase his bill
for his services.
As it is, we pay him 15 times as much for filling out the forms as we pay in income taxes!
Fifteen times as much. That means if we owe the IRS $100, for example, we pay this
attorney $1,500 for his services. It's horrendously expensive.
Please try to consider us first as Americans - just like you - who just happen to have another
address.
Thank you for your interest in our opinion.
December 28, 2010
Mr. Gerald Shields
IRS, Room 6129
1111 Constitution Avenue, NW,
Washington DC 20224
Cc/ Office of Management and Budget
Ref: Draft Form 8938 (revised July 2010)
Dear Mr. Shields,
It is my understanding that the IRS has invited comments on its new form 8938, Statement of
Foreign Financial Assets, and that these are to be directed to you. I am therefore writing in my
own name and on behalf of the international federation I represent and, given the short
timeframe, am also sending my comments via Mr. Ralph Terry, for whom I have an email
address whereas I have none for you.
FAWCO is a global network of over 75 independent organizations, with more than 15,000
members in 39 countries worldwide. We are a recognized NGO with ECOSOC status and a
501(c)(3) corporation established in the State of New York. One of our purposes is to
“provide a voice for American women abroad and to support the rights of all Americans
worldwide.”
It is for that reason that I wish to comment on this proposed new form, which will be
perceived by the large population of Americans living and working overseas as 1)
extraordinarily invasive, 2) a huge burden and ultimately a waste of time for themselves and
for the IRS and 3) illegal in some countries as being an invasion of privacy.
At the outset, I must categorically state that your assumptions regarding the number of people
affected and the time burden involved are incorrect. This form will affect a large proportion
of the law-abiding community of over 5 million Americans living and working around the
globe, often directly for their country.
For this population, as for most Americans in the United States, maintaining bank accounts
abroad is a normal part of our daily life. We receive salaries and pay income tax in the
countries where we live, we take out loans for our cars and our studies and our homes, we
invest in stocks and bonds and savings plans to supplement our income and prepare for
retirement, we maintain joint accounts with spouses to feed and clothe our families, we use
credit cards for a large proportion of our purchases, we pay our bills.
FAWCO U.S. Liaison: 21 Boulevard Lefebvre, F-75015 Paris, France – Email: [email protected]
U.S. Tel: +1 202-580-8186 / Eur. Tel: + 33 (0)1 45 86 35 18
FAWCO IS A NOT FOR PROFIT CORPORATION REGISTERED IN THE STATE OF NEW YORK,
ACCREDITED BY THE UNITED NATIONS AS AN AFFILIATED NON-GOVERNMENTAL ORGANIZATION SINCE 1995
We are not some 350,000 persons residing in the United States and for some reason
maintaining a bank account or investing in securities abroad. We are ordinary citizens and
simply happen to live in Paris or Seoul or Munich because, in many cases, we married a
foreigner or were posted abroad by our company.
Every year, it is my job to remind FAWCO members and visitors to our website of the
requirement to file Treasury form TD F 90-22.1 (the “FBAR”). In my case, filling out the
form, requiring checking year-long bank statements for a number of different checking,
savings and brokerage accounts, is a long and tedious process. Moreover, the “maximum
amount during the year” does not reflect the reality of my financial situation since often, the
maximum amount in one account will re-appear 4 days later in another, having been the
object of a transfer.
In addition to that, each time I open a new account or make a change in a securities account, I
am required to fill out a W9 form confirming that I am a US citizen. My banks then report
each of these accounts to the US authorities.
Moreover, under new regulations which could take effect, my banks (if they continue to
service my accounts in view of the extensive reporting required of them) may be obliged to
report all income and bank movements to the IRS.
I therefore fail to see how my filling out yet another form and obliging the IRS to review it in
addition to all the other information coming in to it can possible be beneficial to me or the
IRS.
Surely the Paperwork Reduction Act prohibits such a huge waste of time and paper!
FAWCO is one co-signatory of a letter to you with detailed comments on various technical
aspects and ramifications of your proposed form. If I am writing to you in my own name and
on behalf of FAWCO, it is to complement that letter with the personal perspective of men and
women like the members of my federation who have clearly been overlooked in the process
of drafting this form. The vast majority of us, like the vast majority of residents of the United
States, are law-abiding citizens. This new reporting requirement on us which duplicates
work already required by the Treasury Department and compounds it with even more
extensive information requirements would result in a great cost in time for overseas
Americans, a daunting verification burden for the IRS and ultimately, a pointless exercise,
since it most heavily affects not the tax evaders and money-launderers you seek to target but
perfectly law-abiding citizens who have no choice but to deal every day with “foreign
financial institutions”.
On behalf of the 16,000 members of FAWCO and the rest of the population of 5 million
overseas Americans, I respectfully urge you and your colleagues to reconsider the need for
Form 8938.
Yours sincerely,
Lucy Stensland Laederich, FAWCO U.S. Liaison
FAWCO U.S. Liaison: 21 Boulevard Lefebvre, F-75015 Paris, France – Email: [email protected]
U.S. Tel: +1 202-580-8186 / Eur. Tel: + 33 (0)1 45 86 35 18
FAWCO IS A NOT FOR PROFIT CORPORATION REGISTERED IN THE STATE OF NEW YORK,
ACCREDITED BY THE UNITED NATIONS AS AN AFFILIATED NON-GOVERNMENTAL ORGANIZATION SINCE 1995
FAWCO U.S. Liaison: 21 Boulevard Lefebvre, F-75015 Paris, France – Email: [email protected]
U.S. Tel: +1 202-580-8186 / Eur. Tel: + 33 (0)1 45 86 35 18
FAWCO IS A NOT FOR PROFIT CORPORATION REGISTERED IN THE STATE OF NEW YORK,
ACCREDITED BY THE UNITED NATIONS AS AN AFFILIATED NON-GOVERNMENTAL ORGANIZATION SINCE 1995
Terry Ralph M
From:
Sent:
To:
Subject:
MNSenzyme [[email protected]]
Monday, January 03, 2011 6:44 AM
Terry Ralph M; 'Gerald'; [email protected]
Tax reporting burden 8938
Dear Mr. Terry,
Dear Mr. Shields,
I am an American Women's Club member living in Germany. The new reporting requirements are
an incredible additional burden. Since I was able to find a tax consultant who was keeping
up to date with all of this ( which in itself took many weeks of searching), I have spent
more than $100,000 in the last year and a half on tax consultant advice & help with all of
the new rules & forms you all are concocting to catch ' tax fugitives'. This is almost
more than my income, which is only dividends & interest! And is also way beyond what is
reasonable considering the low amounts of investments ( and resulting interest &
dividends) I have for my three American children. It feels like we are being punished for
saving for them. In any case, we are being punished for living abroad.
Your rules are worsening the economic safety of many American wives of foreign nationals
since these men no longer want to give their wives signing powers over joint accounts,
endangering their long term economic security.
Several women I know have lost the kinds of joint signing powers that are normal &
practical in an 'American' marriage.
Living abroad , one needs a local bank. But these local banks are refusing to work on
American citizen accounts. I spent the past three years looking for someone to manage some
investments and had to cross at least 10 institutions off the list because they no longer
will work for an American citizen. My daughter, with her small savings, has had the same
difficulty.
My checking account bank here only keeps the account because they have had it for so long.
I have had to move the brokerage business because the brokerage considered the new US
reporting requirements AND the investment restrictions to difficult to implement.( NO ETFs
or mutual funds, etc since they are considered PFICS) The many hours of research ,
interviews & follow up required just to do normal banking has already become a huge burden
on many ' normal' average Americans overseas. The tax reporting is becoming an expensive
nightmare well beyond your 'time to fill out' estimates.
Worst of all, we are being discriminated against for choosing to live
abroad- a scandal, considering that we are some of the country's most staunch and
effective ambassadors.
Just because an American lives overseas, they should not be suspected guilty until proven
innocent. The same reporting rules should apply to all Americans regardless of where they
live. You do not ask in country living citizens for total net worth information. They do
not have to send lists of highest balances on each their accounts. It is appalling,
timeconsuming, & expensive, and putting Americans overseas at great disadvantage.
Short compliance deadlines have exasserbated the expense & confusion. The short timeframe
for comments on 8938 ( over the holidays when people should be spending time with their
families)seem set to discourage comments.
Please send me a draft of the document by email immediately Please reconsider the
necessity & fairness of these new requirements.
Best regards,
Margaret Nelson Spethmann
Hochallee 89
1
D - 20149 Hamburg
Germany
Tel.: +49 (0) 40 - 460 70 313
Fax.: +49 (0) 40 - 460 70 314
Mobile:+49 (0) 172 970 1336
E-Mail: [email protected]
E-Mail: [email protected]
2
ACA
American Citizens Abroad
The Voice of Americans Overseas
AARO
Association of Americans
Resident Overseas
www.americansabroad.org
www.aaro.org
FAWCO
Federation of American
Women's Clubs Overseas, Inc.
www.fawco.org
Mr. Gerald Shields
Internal Revenue Service
Room 6129
1111 Constitution Avenue N. W.
Washington D.C. 20224
U.S.A.
Concerns: Comments on Draft Form 8938
December 20, 20 I0
Dear Mr. Shields,
American Citizens Abroad (ACA), the Association of Americans Resident Overseas
(AARO) and the Federation of American Women's Clubs, Inc. (FAWCO) are non-profit,
non-partisan associations representing the interests of American citizens residing and
working abroad. With more than 20,000 members in over 90 countries, including an
umbrella network linking over 75 independent American, international volunteer
organizations in 39 countries and a vast information network reaching out to the
Americans community abroad, our organizations represent a forceful voice for
Americans overseas. We appreciate the opportunity to present comments to the IRS on
the draft Form 8938.
The community of overseas American citizens is by far the largest group of U.S.
taxpayers directly and significantly impacted by the new Form 8938. It would be difficult
to reside abroad without having at least one foreign bank account in your country of
residence and in its currency. The majority of Americans residing abroad are long-term
overseas residents, and therefore have investments, pensions, life insurance, etc. abroad.
The instruction for completing Form 8938 has not been issued. It is imperative that the
deadline for comments be extended for a reasonable period (60 days?) after the
instruction has been published and disseminated to those who have requested a copy.
Our comments are based on incomplete information and are filed now solely to meet the
posted deadline.
The FATCA legislation, in general, and Form 8938 which is the object of the present
comments, in particular, are clear examples of discrimination against one group of
American citizens - those residing abroad. FATCA is intended to catch tax evaders, a
goal that our associations fully support. Imposing a significant reporting burden on the
five million American citizens abroad is not the answer.
Three issues have an overall bearing on our stated position:
1. The Act requires taxpayers to report the highest value of foreign assets held
during the year, the so-called high water mark. The absence of an IRS instruction
to the contrary makes it an obligation on the taxpayer to calculate 365 days of
value and 365 exchange rates.
2. There is no consideration given for the double accounting involved if an
individual transfers funds during the year from one account to another account
and the high water mark of each account is applied.
3. Some foreign investments do not report annually but only at the time ofsa1e.
Some pension funds may report value only upon retirement.
Practically, the reporting requirement under Section 6038 for foreign assets
should be limited to year-end balances at the applicable year-end rates.
By the very nature of the FATCA requirement, assets are defined in foreign currencies,
such as foreign bank accounts, foreign securities, etc. Consequently, it is only logical that
the reporting currency on Form 8938 should be the currency in which the assets are
actually defined even if an additional column is provided for the translation into
US$ at the end of the year, with one Form for each currency held. Reporting by
currency would have three significant advantages:
a. it would eliminate all of the issues linked to foreign exchange rates, as
mentioned above;
b. for the taxpayer, it would reduce the significant time and risk of errors
when preparing Form 8938, as mentioned in Section B below;
c. for the IRS agent, it would greatly simplifY control or audit since the
primary data are, by their very essence, expressed in foreign currencies.
Regarding your specific questions
A. Whether the collection of information is necessary for the proper
performance of the functions of the agency, including whether the
information shall have practical utility
Form 8938 is the first instance, to our knowledge, whereby the IRS requires information
on assets from the taxpayer. The U.S. tax code taxes on income, not assets. Therefore,
the collection of information on assets held abroad is not necessary for the proper
performance of the functions of the IRS. This new filing requirement is part ofthe
2
FATeA legislation, aimed to track down tax evaders; the only possible use ofthe
information on assets is to cross check the assets declared with the revenue reported on
various foreign assets. This will lead to high administrative costs for the IRS, an unfair
specific reporting burden for U.S. citizens residing abroad, ineffective audits and
potentially unfair penalties for overseas Americans due to misinterpretation ofthe data or
confusion among tax filers. Regardless, one must assume that a U.S. person who decides
not to report certain income will be sure not to report the related assets. Hence, since the
IRS taxes on revenue and not assets, the collection of the asset information will not
enhance revenue collection. Therefore, we see no practical utility in requiring this
information.
B. The accuracy of the agency's estimate of the burden of collection of
information
The IRS has defined the burden of collection of information as follows:
"Estimated Time per Respondent (to complete the form: 1 hour, 05 minutes
Estimated Total Annual Burden Hours: 378,000 "I
The IRS estimate is grossly understated. First, the number of Americans residing
abroad is estimated by the State Department to exceed 5 million. Based on this estimate
and the IRS numbers ofthose filing Form 2555, Form 1116 and the FBAR, the number
of Americans affected by this new filing will probably exceed 2,000,000, more than
five times the IRS estimate of 350,000.1
We are not surprised by this very large discrepancy. The IRS has admitted in several
instances that it does not really know the population of Americans residing abroad who
should be filing reports. In fact, the Treasury Inspector General for Tax Administration
report cited in Section E below states the following:
•
•
I
The IRS will face thc same problem with thc new provision as it does with the FBAR provision as
there is no easy method to determine what constitutes the potential population filing base.
The new provision will be self-reported, similar to the FBAR. Therefore, persons trying to hide
money abroad will open financial accounts in jurisdictions well known for their bank secrecy laws
This translates into 348,932 tax filers, which estimate may be rounded to 350,000.
2 In 2006, the most recent year for which data is available, the number of Americans filing Form 2555 for
the foreign earned income exclusion, of which the great majority resides overseas, numbered 335,000.
Another 969,000 Americans filed Form 1116 using the revenue category "General limitation income"
which covers foreign social security payments, foreign pension payments received as well as earned
income for those who opt to apply Form 1116 instead of Form 2555 or who have income in excess of the
amount ofthe foreign earned income exclusion allowed under Form 2555. The IRS statistics do not report
this data by residence but it is most likely that a significant percentage of this group resides overseas. In
addition, close to 2,000,000 Forms 1116 are filed, mostly with passive income. Some of these filers may
also be individuals who reside overseas and who have investments in foreign securities; many ofthose
residing in the United States will have investments in foreign securities in excess of $50,000 and will have
to file Form 8938. Furthermore, the Treasury Inspector General for Tax Administration report mentions
that in 2009, 534,043 FBAR reports were filed, which is already in excess of the 350,000 estimated
reporting for Form 8938. The great majority ofthose filing the FBAR will have assets exceeding the
threshold of $50,000 required for Form 8938.
3
where they do not exchange infonnation with the United States, making it unlikely that these
accounts will ever be reported.
Based on our practical experience in reporting foreign currency revenues in US$ for the
IRS form 1040 and our analysis of the reporting requirements in Form 8938, the IRS
estimate of the time burden of I hour and 5 minutes for completing Form 8938 is neither
credible nor accurate. It may barely be enough to find the exchange rate(s) applicable to
the reported assets on the reportable dates.
The IRS estimate grossly understates the complexities involved in reporting on all the
classes of assets mentioned on Form 8938. To begin, let us mention five obvious reasons
for our substantially higher estimate:
First, the confusion mentioned in Section E below will require significant time and effort
just to understand what is to be reported under the four separate categories as well as the
differences between Form 8938 and the FBAR (Kindly note that for the moment, in the
absence of instructions, such understanding is impossible).
Second, the statutory requirement to file the highest dollar value in the year will lead the
taxpayer into complex computations, as explained above. Furthermore, exchange rates
vary over time. Just finding the applicable exchange rates may exceed the total time
estimated by the IRS for completing Form 8938.
Third, Form 8938 requires individuals who have shares in companies not held within
financial accounts to determine a value for such shares. What method is applicable
price paid, pro rata net asset value, estimated potential market value even though there is
no market, etc.? Academic libraries contain entire shelves on these issues. The potential
for error, litigation and penalties is enormous.
Fourth, Form 8938 requires individuals to determine the value of a life insurance policy,
the value of rights under foreign social security programs, under collective savings
accounts. These data may be known only annually, or perhaps only upon retirement.
Fifth, if an investor is a partner with others in a start-up venture, how does he value an
investment which may be worth much less than the funds put into the venture?
The IRS has never before required American citizens to file such detailed information on
assets. It is a highly complex requirement, given the technical issues raised and the level
of detail involved. The fact that the IRS has not yet been able to produce instructions for
Form 8938 testifies to the complexity. With the threat of penalties for inaccurate filing,
Americans will be forced to use specialized tax preparers for guidance and help in
completing the form. This will increase their compliance costs significantly, even for the
many overseas residents who owe no U.S. taxes, because ofthe high taxes they pay
locally. In our estimate, the effort involved, in particular in the first years, will
average hours of work or payment for professional support, rather than the one
hour estimated by the IRS.
4
Let us assume that two million Americans file Form 8938 and spend on average 10 hours
completing the form. This amounts to 20 million hours, the equivalent of 500,000 man
work weeks. Assume that on average a professional tax preparer is paid $100 for one
hour's work in finalizing Form 8938; this represents a cost of$200 million for tax payers.
Assume that the IRS time involved to collate, analyze, audit errors, check with other IRS
forms and the FBAR form averages I hour per form; this amounts to 2 million man hours
a year. At 1200 effective hours per IRS agent per year, this corresponds to 1,666 agents
fully devoted to just Form 8938. At an average cost of$1 00,000 per IRS agent, this
amounts to $166 million of IRS expense. Such costs far exceed any potential
additional tax revenue collection due to the filing of Form 8938.
C. Ways to enhance the quality, utility and clarity of the information collected
Under Section E and F below, specific suggestions will be made with regard to Form
8938 itself.
As stated above, two important ways to enhance the quality, utility and clarity of the
information are:
y to specify that the amounts reported are year-end balances, rather than high water
marks, translated into U.S. dollars at year-end exchange rates;
y to report in the currency in which the foreign assets are actually defined.
Both proposals will eliminate major sources of confusion and errors.
However, our associations are of the opinion that 99.9% ofthe information collected
from Form 8938 will be of no use to the IRS. If reporting on assets were to improve IRS
performance in collecting taxes, it would undoubtedly have been included in the tax code
years ago and applied to all American tax payers. And ifthis is not the case, why apply it
today to overseas Americans? Our conclusion is that Form 8938 is likely to be
ineffective, i.e. is unlikely to improve the performance of the IRS.
D. Ways to minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other forms
of information technology
The best way to minimize the burden of the collection of information on respondents is to
render inapplicable I.R.C. § 6038D and to eliminate the need for Americans to report
foreign assets on Form 8938.
As for the potential in using automated collection techniques, this is an illusion since the
type of information requested is not easily automated through electronic filing,
particularly the information required under Parts B, C and D of Form 8938. Furthermore,
the information required is defined and stored in local currencies and exchange rates are
variable. According to the report ofthe Treasury Inspector General for Tax
Administration, the IRS is still studying ways to try to computerize the FBAR report even
though the FBAR has been in existence for many years, and yet the FBAR deals with a
much more limited scope of assets.
5
Since Form 8938 will become an integral part of filing Form 1040, the inability to file
electronically Form 8938 will make it impossible for all Americans residing overseas to
file their Form 1040 electronically. This will lead to increased inefficiencies for the IRS.
Effective I January 2013, foreign banks and brokers will be required to report account
values to the IRS. Since any report of value is only informational, why should both the
foreign entity and the American taxpayer be required to report? The duplication is
burdensome, costly and unnecessary.
E. The sources of confusion and the risks of errors
The confusion among overseas tax filers and potential errors in filing risks are very
significant because Form 8938 is required in addition to TD F 90-22.1 (usually referred
to as the FBAR Form), which has other criteria, a different threshold for reporting and
must be filed separately to Treasury. In fact, the Treasury Inspector General for Tax
Administration clearly highlighted the complexity and potential source of confusion in its
report dated September 29, 20 10 (Report no. 20 I0-30-125).
"Another problem is that many taxpayers will find that their filing requirements will not only have increased,
but also become considerably more complicated as a result of the addition of I.R.C. § 6038D. For example:
• Taxpayers not only will be required to file the new information for I.R.C. § 6038D, but they may
also be required to file an FBAR.
• Taxpayers may also find that certain terms are defined differently in the BSA regulations and the
Internal Revenue Code. For example, the term United States is defined in the BSA regulations as
... the States ofthe United States, the District ofColumbia, the Indian lands, and the Territories
and Insular Possessions ofthe United States. 1201 While in the I.R.C. it is defined as "United
States" when used in a geographical sense includes only the States and the District of
Columbia. [21 J
• Complexity will also be encountered because of the differences between the FBAR requirements
and LR.C. § 6038D; individual taxpayers in similar circumstances could have different reporting
outcomes...
The following example demonstrates the potential differences in these two provisions:
Two individual taxpayers owning foreign stocks worth $55,000 can end up with entirely different reporting
outcomes. One taxpayer that owns $55,000 in foreign stocks through a foreign stock brokerage account
would be required to file both an FBAR and the I.R.C. § 60380 disclosure on his or her tax return, while the
other taxpayer that held $55,000 worth of foreign stocks issued by a person other than a U.S. person outside
of a foreign financial account would only be required to complete the LR.C. § 6038D disclosure on his or her
tax return. In this example, if the amount the stock is worth is reduced from $55,000 to $45,000, the first
taxpayer is only required to file an FBAR and the second taxpayer is not required to tile a disclosure of any
type."
Our organizations would like to highlight other situations which will be a source of
confusion for Americans residing abroad. For example:
• A stay-at-home mother who is an American married to a foreigner has just
interest income of$I,OOO on her personal savings account which amounts to
$55,000, the amount saved when she worked prior to having a family. She also
has signatory authority on her foreign husband's current account as well as a
credit card linked to that account. For the FBAR, she must file both accounts, as
she has signatory authority over her husband's account. For the I.R.c. § 6038D
(Form 8938), does she have to file a 1040 even though her personal revenue is
6
below the income threshold for required filing, just to file for her one personal
account of $55,000? This example is not an exceptional case as half ofthe
Americans residing overseas on a long-term basis cite marriage as the reason.
• An individual who has $9,000 in a banking account abroad and a foreign life
insurance policy worth $45,000 will have to file Form 8938, since total foreign
assets exceed $50,000, but not the FBAR as the bank account is below $10,000.
• An individual who has signatory authority as treasurer, but no financial interest in
bank accounts of several charitable organizations abroad will have to report these
on the FBAR, but not on Form 8938.
There will remain much overlap between the two reports, which means that American
citizens residing abroad will have to file two separate reports, which are different, but
which contain largely the same information. This creates a double administrative burden
for the individual citizen as well as a double burden for the IRS, since it is the IRS which
is administering the FBAR for the Treasury. There is also an increased likelihood that
human error will lead to discrepancy in the forms, presenting an additional administrative
burden to the taxpayer and to the IRS.
Confusion related to filing two reports can be highly penalizing as the IRS has stated:
"The IRS will use the information to determine whether to audit this taxpayer or
transaction, including whether to impose penalties." The penalties allowed under I.R.C.
§ 60380 are severe and would probably be cumulative with penalties for inaccurate filing
ofFBAR. Overseas Americans who make errors with no intention of defrauding the IRS
risk losing a good part of their savings through penalties and/or lawyers fees for defense.
This need to report assets under threat of confiscation ofthose assets specifically
discriminates against U.S. citizens residing abroad.
F. Specific comments on details of Form 8938
1. Title at top of the form: The comment "Attach to your tax return ....." should begin on
the line below the title, not on the same line. Similarly, why is there the gap before "See
separate instructions"?
2. Presumably the OMB and the Sequence numbers will be numbers in the final version.
3. Why do you have the text "Identifying number" instead of "Your social security
number", as is found on other forms for the 1040, including form 2555? Form 1116 uses
the term "Identifying number as shown on page 1 of your tax form". Even the TO F 90
22.1 (FBAR) uses the term "U.S. Taxpayer Identification number". Just "Identifying
number" will raise confusion in the minds of tax filers.
4. The tax filer is systematically referred to instructions with regard to Part A, B, C, O.
The instructions should make very clear at the beginning the difference between the
categories because a tax payer will wonder if he/she must list under Part B all stocks held
in a financial account, which are already included in the totals of the statement of the
financial institution listed under Part A. For Part C, instructions must list those contracts
7
which must be reported and those which do not need to be reported. For Part 0, what is
meant by a foreign entity? What makes it different from any "stock or security issued" as
defined under Part B? What is the distinction between Part C and Part 0, particularly
since both apply the term "interest"?
5. In the four boxes, you have "Maximum value .....during taxable year." As we have
already commented above, it is practically impossible for the tax filer to know how to
reply. The tax payer does not have a daily value of investment positions and the US$
changes in value every day. The instructions should make the filing requirements very
clear and there should be a footnote reference on the form itselfthat the definition of
maximum value is defined in the instructions. As we have stated above, applying the
year end foreign currency values translated into dollars at the year end U.S. dollar rate is
the only practical possibility.
The term "taxable year" also raises more questions. Is the term "taxable year" defined in
the instructions? Does this correspond to the calendar year? This question is raised
because Form TO F 90-22.1 uses the term "Maximum value of account during calendar
year reported". Since those who file Form 1040 jointly with this new form will also have
to file TO F 90-22.1, consistency in terms would be most helpful. Additionally, our
organizations have asked several professional tax filers ifthe first "taxable year" is 2010
(due to be reported April 15, 20 11) or the following year, and we have received varying
opinions - even the professionals are not clear as to when the reporting requirement
commences. And the IRS office in Paris has refused to take a stand on this simple issue.
6. Very little space is provided for the Name of financial institution, Name of the issuer,
Name of counterparty of instrument, contract or interest. On the TO F 90-22.1, a whole
line is allowed for the name. Similarly the space allotted for the address is very
restrained; in contrast, the TD F 90-22.1 has five separate boxes devoted to the address
Mailing address; City; State, if known; Zip/postal code, ifknown; country. Under Part B,
the "Description of stock or security by class, issue or type" also has insufficient space;
imagine, for instance, trying to fit in "6 5/8 % convertible subordinated bond, series B,
due Oct. 17, 2019" in the box. The form as currently presented does not lend itself in any
way whatsoever to electronic filing. In fact, the only way that the current format will
allow individuals to complete the form in a readable fashion would be if the form would
allow wrap around text in each box - which is most unlikely as such forms are always
PDF. Under Part C, the box "Description of other instrument, contract or interest" allows
a little more space, but is still most likely inadequate. Under Part 0, "Description of
interest held in foreign entity" the space allotted is totally inadequate.
7. In Part D, "foreign" is misspelled as "foreing" in the box concerning Maximum value.
8. The average taxpayer residing overseas will have no idea why all of a sudden Form
8939 must be filed. It would be helpful for the taxpayer if Form 8938 mentioned that
LR.C. § 60380 in the tax code since March 2010 requires filing Form 8938 starting the
fiscal year 20 I0 or 20 11, whichever is applicable.
8
Conclusion
We thank you for this opportunity to express our comments on the proposed Form 8938.
While we have attempted to provide constructive comments at all levels, we would like
to conclude by stating that Americans residing abroad represented by our organizations
are convinced that the entire FATCA legislation, including the additional reporting
requirements for U.S. persons to file Form 8938 with the 1040, will have serious negative
repercussions for the United States economy in general and for American citizens
residing abroad in particular.
• Requiring Form 8938 in addition to the FBAR is a total overkill on the part of
Congress. This will lead to significant inefficiencies within the IRS and high
compliance costs for American citizens. Regrettably, it will almost certainly lead
to non-compliance on the part of many and the resulting loss of available
information about them at all.
• The penalties outlined under I.R.C. § 60380 (d) for not reporting on time are
confiscatory with the systematic increase in penalty beyond a 90-day delay up to
$50,000. Many individuals overseas who currently do not file the 1040 because
their income is below the filing requirement threshold will ignore the new asset
reporting requirement and will be vulnerable to unjustifiable and unfair penalties.
Is the purpose of the IRS to collect penalties or to collect taxes?
• I.R.C. § 60380 (g) then states: "No penalty shall be imposed by this section on
any failure which is shown to be due to reasonable cause and not due to willful
neglect. Thefact that aforeignjurisdiction would impose a civil or criminal
penalty on the taxpayer (or any other person) for disclosing the required
iriformation is not reasonable cause." Such a statement not only reflects total
disdain for the rest of the international community, but also places American
citizens residing overseas in an untenable position, particularly in those countries
where privacy laws preclude requiring this type of information.
• Looking beyond the specific requirements of Form 8938, our organizations are
particularly concerned by the numerous and insidious forms of discrimination, all
linked to the FATCA requirements, that have recently appeared against
Americans; for instance:
o Foreign insurance companies are already beginning to refuse to issue life
insurance policies for American citizens.
o Foreign banks are refusing to have American clients with investment
portfolios; some even refuse to open current accounts for Americans.
o The reporting requirements under FATCA with regard to partnerships and
shares held in companies owned outside of financial institutions will
seriously engender prejudice for the United States as well as for its
citizens residing abroad. Americans will no longer be invited to join
9
. "
foreigners in start-up companies overseas, as just 10% American
ownership requires IRS reporting on the partners and the company.
o American citizens and hence American businesses are becoming pariahs
in the international banking world, at a time when the U.S. aims to double
its exports. FATCA reduces the competitiveness of U.S. companies in the
global market place.
• Many foreign financial institutions will refuse to enter into agreements with the
IRS for the filing requirements of those institutions. They will consequently
disinvest their U.S. securities and will encourage their foreign clients to do the
same. This is already occurring in Switzerland and Japan, for example, and banks
located in the European Union have signaled that FATCA legislation is contrary
to European legislation and have placed reserves on their participation in the
program.
• Foreign financial institutions which do not enter into an agreement with the IRS
to be a registered FFI will create a second tier of foreign financial institutions that
will work outside of the framework of the U.S. dollar. U.S. persons who want to
evade U.S. taxes will be welcome in such institutions. The Chinese will be
delighted to have this encouragement to create a non-U.S. dollar trading zone.
• FATCA engenders one of the most self-destructive programs for the economic
welfare and future ofthe United States ever devised by Congress.
ACA, AARO and FAWCO strongly recommend not only seriously revising Form
8938, but also question its usefulness in terms of information collected, IRS
efficiencies and tax filer compliance. The IRS should encourage Congress to repeal
FATCA legislation and the related filing requirement for Form 8938.
Sincerely yours,
ACA
American Citizens Abroad
The Voice of Americans Overseas
[email protected]
www.americansabroad.org
Marylouise Serrato
Executive Director
AARO
Association of Americans
Resident Overseas
[email protected]
www.aaro.org
FAWCO
Federation of American
Women's Clubs Overseas. Inc.
USLiaison ialfawco.org
www.fawco.org
John Flint
Lucy Stensland Laederich
President
U.S. Liaison
10
..
xxxxx -STATEMENT OF FOREIGN FINANCIAL ASSET~
Statement of Foreign Financial Assets >Attach OMB No. 1545-xxxx
to your tax return if you owned specified foreign financial assets having an r - - - - - - -
DRAFT FORM
Fonn
8938
(Rev. July 2010) Dept.of
the Treasury Internal
Revenue Service
aggregate value of more than $50,000.
instructions.
>See separate Attachment
Sequence No. XXX
Name(s) shown on your income tax return
Identifying number
Important: Fill in all applicable lines and schedUles. All information must be in English. All amounts must be
stated in U.S. dollars unless otherwise indicated.
Complete Part A if you held any interest in any financial account maintained by a foreign financial institution
during the taxable year (see instructions), and
Complete Part B if you held any interest in any stock or security issued by a person other than a United States
person (see instructions), and
Complete Part C if you held any interest in any financial instrument or contract held for investment that has an
issuer or counterparty which is other than a United States person (see instructions), and
Complete Part D if you held any interest in a foreign entity (see instructions).
Part A. Schedule of any financial asset maintained by a foreign financial institution (see
instructions).
Name of financial institution
Address of financial institution
..,
Maximum value of
account during
taxable vear
~
I
r
......
Financial account
number
,.~
r
III
Part B. Schedule of any stock or security issued by a person other than a U.S. person (see
instructions).
Name of issuer
Address of issuer
Description of stock Maximum value of
or security by class, stock or security
issue and type
during taxable year
...
Part C. Complete blocks (a) through (f) with schedule of any other instrument, contract or
interest (see instructions).
(a)
(b)
(c)
Name of issuer
Address of issuer
Description of other instrument, contract
or interest
(d)
(e)
(f)
Name of counterparty of
instrument, contract or interest
Address of counterparty
Maximum value of other instrument,
contract or interest during taxable year
Part D. Schedule of any interest in a foreign entity (see instructions).
Name of foreign
tity ...,
-
-
..-
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~
entity
.
Cat. No 37753A
Description of
interest held in
foreign entity
Maximum value of
interest in foreing
entity during taxable
year
Tatyana Schmidt, 2, impasse de la Maitrise - 71400 Autun, FRANCE
Ellen Schmidt, 61, rue de la Grange aux Belles - 75010 Paris, FRANCE
MEMBERS OF AARO, France
Mr. Gerald Shields
IRS, Room 6129
1111 Constitution Avenue, NW,
Washington DC 20224
Subject Draft Form 8938
Paris, 20 decembre 2010
Sir,
In reply to the Intemal Revenue Service's call for comments on the draft of the new tax form 8938 destined
to be filed as part of the individual income tax return of certain US tax filers, you will find hereafter our
observations.
• The threshold doesn't comply with the Foreign Earned Income Exclusion (form 2555-EZ) stated for
the 2009 tax return, which is 91,400 USD.
•
Moreover, this threshold seems low since the current exchange rate would set this threshold for US
tax filers in Europe at approximately 38,000 Euros.
•
The information requested will significantly increase the amount of data required to file a tax return
for expatriates or persons holding assets abroad as well as impose additional record-keeping and
reporting obligations on Americans filing tax retums from overseas.
•
Furthennore, these processes will, in and of themselves, place yet another heavy burden on the
American tax payer with no clear instructions to date, not to mention the fact that banks abroad will
consider doing business with Americans living abroad as a liability.
•
What about Financial Privacy? Is the collection of such data necessary for the proper performance
of the functions of the IRS, including whether the information shall or shall not have practical utility?
•
How can expatriates be sure that any data provided is protected from public exposure such as the
WikiLeaks scandal?
•
We Americans living abroad consider ourselves as "unpaid Ambassadors" representing our country
in a variety of positions and capacities as well as positively characterizing and defending our
country's political and social positions.
•
The goodwill we thus create will be jeopardized.
We would like to add that I, Tatyana Schmidt, a senior US citizen and mother to Ellen D. Schmidt, do not
qualify for Medicare due to the fact that I reside abroad and what is more, am subject to double taxation.
MmeP. Kaas
Paris, 23 December 2010
Mr. Gerald Shields
IRS, Room 6129
1111 Constitution Avenue, NW
Washington DC 20224
USA
RE: Proposed form 8938
Dear Sir,
As an American living permanently in France, I have recently learned of the IRS plans to
ramp up the reporting obligations of US citizens residing overseas on their foreign financial assets. I
understand you are collecting feedback on the Draft Form 8938.
Part A of Draft Form 8938 duplicates FBAR information but offers much less and
inadequate space. Completing the FBAR (Form 90-22.1) has already been quite cumbersome to the
US taxpayer living abroad in that there is no simpler way to find the required information than by
poring over a year's worth of account statements. Maximum value of an account over a year's period
is not a figure readily obtained. Moreover, I wonder what useful information can be gleaned from
this exercise when account balances naturally change as salary, pension or dividends are paid in and
living and tax expenses are paid out. Currency con~ersi6n into US dollars skews the information
even further. Why wouldn't the lowest account balance be as interesting to the IRS as the highest?
What do you think your highest account balance says about you, Mr. Shields?
Parts B, C and D of proposed Form 8938. demand exteI;lsive detail on other foreign financial
interests, and the space allotted to provide thisinfonnation is also severely inadequate. Some'
French financial instruments and business structures have no precise US equivalents so defy
accurate description in anythingl~ss than several paragraphs.
I
Itemizing stocks in PartB could quickly become unwieldly and several pages would be
necessary. In such volatile market conditions it would seem'fair (by which I mean, as futile and
invasive) to invite notation of the lowest value of one's stock portfolio along with the highest.
Again, more space would be needed.
Moreover, notwithstanding the added and significant burden on the taxpayer to list each
stock and painstakingly review its performance history to determine its highest value over the
taxable year, is the IRS really prepared to review all ~his additional infonnation from the estimated
5 million US citizens living abroad?
For my part, I cannot begin to fathom the number of hoursthe US taxpayer resident abroad
would have to devote to collecting'this particular and peculiar data and the professional fees he
would incur for help completing this Kafkaesque Form 8939. Frankly, this looks a lot like
Iharassment.
,
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'Yours sinc~rely;
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Page 1 of 10
Terry Ralph M
From:
Norman Reuter [[email protected]]
Sent:
Tuesday, December 28, 2010 1:00 PM
To:
Terry Ralph M
Subject: comments on burdens imposed by Form 8938 - Continued
To Mr. Ralph M. Terry
For transmission to Mr. Gerald Shields
Dear Mr Terry,
This e-mail is a follow-up to my e-mail of yesterday evening (below).
I am sending you this e-mail in lieu of sending a paper copy, as discussed by telephone
yesterday. Thank you for your kind offer to transmit before the January 3 deadline my
comments on the burdens imposed by Form 8938.
The below e-mail was sent last night your time, in the wee hours of the morning Paris
time, and I was not able to type a conclusion. I wish to do so now. Also, I wish to clarify
a couple of the points made in last night's below e-mail.
1/19/2011
Page 2 of 10
I sincerely hope that solutions to the electronic filing issues enumerated below will
or have already been implimented. Those solutions must permit the declaration of a
significant number of foreign assets. By significant, I would say at least 40 foreign bank
accounts in Part A of Form 8938 and innumerable, hundreds, of individual securities in
Part B.
As for Part C of Form 8938, I cannot comment because I do not have much experience
with unusual investment vehicles and am not even sure what you are looking for except
perhaps someone who sells on an installment plan, which I have never seen in France. I
would still provide ample space so as not to infringe on electronic filing.
As for Part D, you certainly need more than two lines. I have several clients who have
multiple Forms 5471 and 8865. To be on the safe side, I would allow for between 5
and 10 closely held entities per taxpayer.
I will be contacting my software developer as soon as I have confirmation form you that
electronic filing will be permitted. I would appreciate that you contact all software
developers and emphasize the importance of enhancing their software to allow
electronic filing of Form 8938 for U.S. taxpayers with significant holdings overseas as
indicated above. This is extremely important as the greatest obstacle to electronic filing
from overseas today is the software developers.
Lastly, in regard to electronic filing, I wish to emphasize what I said and indicated below
concerning the work I did to help bring about viable electronic filing from overseas.
1/19/2011
Page 3 of 10
This involved months of time over the years 2000 through 2004, time for which I was paid
nothing. After the IRS's promotion of electronic filing, the investment of time I have
made, and the importance of electronic filing to me today, I trust that the IRS will not let
me down.
I regard to the burdens imposed on taxpayers and tax return preparers as indicated
below, I wish to emphasize that the estimated completion time as indicated (one hour and
five minutes) is completely unrealistic. For the long term overseas community of
Americans with most or all of their assets overseas, think more in terms of doubling or
tripling the time for annual tax return preparation. And overseas tax returns are
complicated. The average tax return that I do takes a day. Some take less and some
take more. So the average tax return with Form 8938 could take two days. This will
require a signifcant adjustment to how I run my practice, and what I charge for a tax
return.
Why was such an unrealistic completion time proposed, even at this stage for the draft
form? I can only presume that the employee responsible for this glich was trying to
please his superiors. I sincerely hope that the IRS will have the courage to correct
this administrative reflex so that in the end you will not simply be dumping on me.
As I mentioned below, this lack of realism does not help compliance efforts on your part,
or on my part. Particularly on my part, as I am your compliance man in the field. I am the
one who has direct contact with each taxpayer every year. I have to explain this new
requirement to taxpayers, my clients, and sell them the importance of complying, of doing
it right and doing it well. How am I supposed to do this if you are telling them that it
should take one hour and I know from experience that it will take eight hours? How will
1/19/2011
Page 4 of 10
they feel about paying me for the extra time now that you have planted doubts in their
minds? Will they go to another preparer who has less qualms about doing it right and
doing it well? This last is rather easy. How do you prove "knew or should have known"
against a preparer, especially when we are dealing with foreign assets in a foreign culture
in which IRS personnel are pretty much helpless.
Generally, I find the Form 8938 redundant and inefective as well as being extremely
burdensome (as I mentioned below, it will be like having to do an estate tax return every
year along with your income tax return). It is redundant because you already have the
foreign bank account form (the TD F 90-22.1), and Forms 5471, 8865, 6252 and 3520. It
is ineffective because people who are cheating or terrorists are simply not going to file it,
the same way they already don't file anything. And in that way, it is unfair because it
justs puts a significantly greater burden on those who are already complying.
But if Congress mandated it, then I guess we're stuck with it, and as mentioned above, it
will mean a significant change in the way overseas return preparers organize their
practice. I will be immensely grateful if you take into account my comments. I will also
be greatful if you let me know at this time your plans vis-a-vis electronic filing with Form
8938.
With my very best regards,
Norman Reuter
PTIN: P00155590
1/19/2011
Page 5 of 10
Telephone direct dial: 011 33 1 47 05 01 52
Fax direct: 011 33 1 47 05 56 48
1 rue de Villersexel
75007 PARIS, FRANCE
----- Original Message ----From: Norman Reuter
To: [email protected]
Sent: Tuesday, December 28, 2010 3:08 AM
Subject: comments on burdens imposed by Form 8938
To Mr. Ralph M. Terry
For transmission to Mr. Gerald Shields
Dear Mr Terry,
I am sending you this e-mail in lieu of sending a paper copy, as discussed by telephone
earlier today. Thank you for your kind offer to transmit before the January 3 deadline my
comments on the burdens imposed by Form 8938.
1/19/2011
Page 6 of 10
I am a tax return preparer in Paris France. I have been working as such for over 20
years, serving the middle and lower income American community in France. I am an
attorney (California and Paris bars) with an LLM (tax). I became a tax return preparer
because I wanted to stay in Paris, and tax return preparation was the niche available. I
have my own firm since November 1992.
I see considerable burdens asociated with Form 8938, both from the point of view of the
taxpayer, and also from the point of view of the tax return preparer.
Almost all my clients are U.S. citizens and long term residents of France. Many are
married to French spouses. Their lives are here, and consequently, they have many
bank accounts here where they live. This is aggravated by the fact that French banks
tend to be very aggressive, and prompt one to open as many different accounts as
possible. One who is not well versed in money matters and lends their confidence to a
French banker, generally ends up with a dozen (or dozens) of accounts, many
of which the client does not truly understand their functioning.
I have experience declaring assets in two contexts, one being the foreign bank account
form, i.e., the U.S. Treasury Form TD F 90-22.1, and the other being French wealth
tax returns. I also do estate tax returns from time to time.
Before January 1, 2009, the Form TD F 90-22.1 had a very broad check the box line as
to the value of each account: under $10 000, $10 000 to $100 000, $100 000 to one
million, etc. After December 31, 2008, the form has required the exact highest amount
in each account during the year. For many people, this has turned what was originally
an hour or two compliance requirement into something which could take more than a day,
1/19/2011
Page 7 of 10
searching for and then through monthly statements for more than a dozen accounts,
calling the bank for missing information, etc.
On a French wealth tax return, one basically must list assets in detail, with account
numbers for bank accounts, values at the end of the year, etc. In principle, one must list
each security held in securities accounts, similar to the requirement in Part B of Form
8938. I know from experience that this is extremely time consuming, and generally I ask
the clients to do it themselves if possible. It will of course be more time consuming if the
taxpayer must list not simply the asset values at the end of the year, but the maximum
values at any time during the year.
It is evident from the form that taxpayers must declare assets other than bank
and financial accounts at foreign institutions. For example, Part D requires declaration of
interests in foreign entities. The estimated time given for preparation of Form 8938 is one
hour and five minutes. How is one supposed to declare all the above details about
holdings in foreign financial institutions and evaluate a closely held business in one hour
and five minutes?
I understand the problems Congress and the IRS face concerning compliance. On top of
that, I am a patriot and my country is at war. That being said, to anticipate that the
detailed declaration of one's assets (my clients are long term residents with their assets
over here) will take one hour and five minutes shows a draconian disregard
and disrespect. It does not help compliance efforts on your part or on my part, and it was
absolutely unnecessary. The IRS has experience in this regard concerning estate tax
returns and the time it takes to prepare them accurately.
1/19/2011
Page 8 of 10
As for the tax return preparer, I have a number of questions. Since Form 8938 must be
attached to the income tax return, what will be my level of responsibility regarding the
items declared on the 8938? I already have a responsibility to make sure all revenue
which I know about, or have reason to know about, is declared on the 1040. If I now will
have the same reponsibility regarding the assets and their values, it will be like doing
an estate tax return every year in addition to the income tax return. This will multiply the
time of annual tax return preparation by two or three, depending on the client!
Tax year 2000 was the first year the IRS electronic system accepted foreign addresses.
There was an IRS town meeting in London (the first ever outside the U.S.) to introduce
the overseas tax preparer community to electronic filing. I attended that meeting and
started trying to file electronically, somewhat desperately I must say. Returns overseas
are complicated returns. And as I mentioned above, my clientele is the middle and
low income community. That's where most returns come from. Contrary to popular
belief, most Americans in France are not wealthy. You can only bill these people so
much, and I was desperately trying to make my practice viable.
Due to continued limitations in the IRS system, in particular concering the special rules
for foreign spouses, and tax software limitations concerning foreign addresses, I could
only file one or two returns electronically every year for several years. Even after I
changed software and had worked with the software engineers to upgrade their system, I
was still limited by the IRS system. Then one day the then head of ETA responded to
one of my e-mails and put me in touch with a an IRS employee in ETA who had
international experience and understood what I was talking about. Together we started
working on the foreign spouse issues and he requested the necessary enhancements of
1/19/2011
Page 9 of 10
the IRS electronic filing system. In the process, Publication 501 was also modified to
more clearly address the rules concerning foreign spouses. And from that time on, I
believe it was 2004, filing electronically from overseas became economically viable.
So, what is the scope of this new form vis-a-vis electronic filing? What with the exchange
rate as it has been, most people, even middle income people, will have $50 000 in assets
outside the U.S. (the exchange rate has nothing to do with the cost of living). Most
Americans overseas will have to file the 8938. Will I be able to file their returns
electronically? Or are you going to put me out of business after all these years of
struggle? Part A of the form has room for four accounts. This is rediculous. How many
accounts do you and your family have in the U.S.? Americans who live here, have their
life here, and they end up quite naturally with all kinds of accounts where they live, just
like Americans who live in the U.S. (joint accounts with their spouse, custodial accounts
for their minor children, power of attorney over accounts of aged relatives, business
accounts if they have a business like me, blocked accounts to guarantee payment of rent,
not to mention personal savings and checking accounts, etc.). Is there going to be a
limitation on the number of foreign accounts and assets one can have and still e-file?
I sincerely hope that solutions to the above issues will be implemented before we are
required to file Form 8938.
With my very best regards,
Norman Reuter
1/19/2011
Page 10 of 10
PTIN: P00155590
Telephone direct dial: 011 33 1 47 05 01 52
Fax direct: 011 33 1 47 05 56 48
1 rue de Villersexel
75007 PARIS, FRANCE
1/19/2011
Page 1 of 1
Terry Ralph M
From:
Penny Reider [[email protected]]
Sent:
Tuesday, January 11, 2011 12:17 PM
To:
Terry Ralph M
Cc:
Paul Tansley
Subject:
[spam] Form 8938
Follow Up Flag: Follow up
Flag Status:
Orange
Dear Mr Terry,
I work for a tax professional and I have some questions regarding the proposed Form 8938 (Statement of
Foreign Financial Assetts).
Could you please advise me when this form will be in circulation. Should we be gathering information from
our clients with a view to this form being included in the 2010 returns.
Regarding part A of the draft will this include pensions, iinsurance & foreign retirement.
I have been able to find a draft of the form online but no instructions appear to be available, if possible could
you please e-mail me a copy so that we can be prepared should the form be
placed into service for the 2010 tax return.
Best Regards
Penny Reider
281 361 3136
1/19/2011
Terry Ralph M
From:
Sent:
To:
Subject:
Rebecca Sullivan Voelker 92 [[email protected]]
Monday, January 03, 2011 8:02 AM
Terry Ralph M
IRS Form 8938 - For transmission to Mr. Gerald Shields
To Mr. Ralph M. Terry for transmission to Mr. Gerald Shields
Dear Mr. Terry,
Thank you for your assistance in this matter.
Dear Mr. Shields,
I am responding to the request for comments regarding the
proposed IRS Form 8938 - Statement of Foreign Financial
Assets. As one of the over 5 million Americans living
overseas, I ask your office to reconsider implementing this
onerous and invasive requirement.
My family already files yearly tax declarations with the
IRS, which naturally includes income derived from
investments and savings in German and American institutions.
Requiring account information and balances on our German
accounts would not only represent a significant repetition
of the labor already required by the Treasury for TD F
90-22.1, but also be a deep invasion of the privacy of our
financial matters. Dishonest filers would simply leave
accounts unreported, as they are probably already leaving
income unreported, while honest filers would be subject to
unwarranted scrutiny. Americans residing in the US, who
naturally have almost all their financially accounts in
American institutions, are not required to provide this
information in their tax returns, so I must ask why should
Americans residing abroad be?
I would like to raise the additional point of personal data
security for your consideration. Filing from an overseas
location means that we must entrust our tax documentation to
local mail services (instead of, for example, being able to
file over a secure electronic connection). Requiring us to
include detailed information, including account numbers, for
our accounts worldwide represents an opportunity for data
and identity theft with serious consequences for law-abiding
Americans. Additionally, recent high-profile cases of
data loss or theft from credit card firms, large
corporations, and even the US government raises the question
of how securely the IRS could maintain this most private of
data.
Very few Americans move overseas to avoid payment of U.S.
federal taxes (and those that do, don't move to Germany). I
urge you to realize that the burden and risk this
requirement would place on expatriate Americans far
outweighs any modest benefit to the IRS in tax collection.
Should you have any further questions, I can be reached at
the sending email address, or at the below street address.
Sincerely,
Rebecca Sulllivan Voelker
1
Am Domacker 46
47447 Moers, Germany
2
Richard JOHNSON
3, Avenue Emile Acollas
75007 PARIS - France
Paris, December 22, 2010
Mr. Gerald Shields
IRS Room 6129
Dear Mr. Shields
I have reviewed the draft proposal for Form 8938 Statement of Foreign Financial
Assets and am writing to express my strong opposition to this additional burden on expatriate
American citizens. America is the only country to require its citizens living in a foreign
country to file annual tax returns. Normally this would not be a problem because our local
taxes are higher than the US ones. However because the US tax code is hundreds of pages
filled with loopholes & special provisions, it is impossible for a normal citizen to fill it out
properly. I have an engineering degree from RPI and an MBA from Harvard but it is far to
complicated for me and I am obliged to pay a tax professional $2,000 each year to prepare my
return which is at least 50 pages just to prove lowe nothing. In contrast my French return is
just 6 pages and it takes me only 30 minutes to fill in the blanks.
We are already required to list all our significant financial assets under threat of
serious fines and financial sanctions. The draft form duplicates this data but requires a huge
amount of details. My wife & I have lived in Europe for 43 years and all our financial assets
were earned here and have been subjected to local and US taxes. We are in our 70's and have
been retired now for 3 years. We each have stock accounts with 15 to 20 different stocks each
that we trade regularly plus other investments which we also report to the Treasury. Reporting
all these transactions as required in the draft form would be a significant and unnecessary
burden. It has gotten to the point that we, like many of our fellow expatriates, are considering
applying for French citizenship. The health care is first class and costs half as much as in the
US. It's a tempting alternative.
Yours sincerely,
Mr. Gerald Shields
IRS, Washington, DC
4137 Oxford Ave
Montreal, QC, Canada H4A 2Y5
Nov. 30, 2010
Dear Mr. Shields,
This letter is in response to the IRS request for comments on the proposed draft of Form 8938,
Statement ofForeign Financial Assets.
I am a college physics teacher. My wife and I are US citizens who have lived and worked in Canada for
over forty years. We have scrupulously complied with the increasingly onerous US tax reporting and
filing requirements, including the new FBAR forms, Forms 8891, etc. Since our assets in Canada exceed
$50,000, we will now have to complete the new Form 8938.
As I'm sure you realize, Form 8938 is largely (though not entirely) a duplication of the FBAR form.
Moreover, 8938 asks for essentially the same information as Form 8891 (relating to Canadian retirement
plans, and already redundant with FBAR), and there is much overlap with Form 3520 (foreign trusts).
I am beginning to wonder if Congress and the IRS mean to smother overseas Americans with so much
paperwork that they will either have to return to the US, or give up their citizenship. To quote one
lawyer's reaction, "Redundancy redundancy is is good good". In this light, it is astonishing to see so
much additional redundancy within Form 8938 itself.
Specifically:
a) Part A refers to "financial assets", but also to "financial accounts". What about securities accounts?
These accounts may contain foreign stocks and bonds. Are we to report the accounts, and then
report as well the assets within those accounts? And that's just in Part A. Part B asks for a list of
separate stocks and bonds. If these are contained within the accounts reported in Part A, must they be
listed again in Part B?
b) In part C, what exactly is an "other instrument, contract or interest"? I trust that clear instructions are
forthcoming. And in Part D, an "interest in a foreign entity" could, it seems to me, include everything
already reported in Parts A, B and C! Are we to report these all a second or third time?
The FATCA law is a perfect example of unintended consequences. It's supposed to crack down on
tax cheats, but I suspect most of those cheats are far too smart to be caught. The real burden of the law
will fall on the millions of honest Americans who live and work overseas, and who have foreign accounts
and assets as an ordinary part of their daily lives. I see no evidence that IRS understands their problems,
nor that it is making any effort to alleviate their outsized paperwork burden.
Specific recommendations:
1) Get rid of the FBAR, Form 8891 and possibly also Form 3520, and fold them into Form 8938.
Form 8938 could have extra schedules, to be used by those having unusual or complex assets.
2) Get rid of the confusion and redundancy within Form 8938 by writing clear and simple instructions.
3) Bring in regulations that significantly reduce the filing burden for those Americans who live abroad,
and who have accounts in the foreign countries where they reside. There could be a requirement of
residence for some specified number of years before filing relief kicks in. Plainly, there is little
likelihood that such accounts would have been set up to evade taxes.
Richard M. Shoemaker
CLAYTON
FINANCIAL AND TAX
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December 17,2010
Mr. Gerald Shields
Internal Revenue Service
Room 6129, 1111 Constitution Ave NW
Washington, DC 20224
Re: Proposed Statement of Foreign Financial Assets
Dear Mr. Shields:
I am writing regarding the proposed Statement of Foreign Financial Assets, Form 8938.
Your request for comments noted,
Comments are invited on: (a) Whether the collection of information is necessary for
the proper performance of the functions of the agency, including whether the
information shall have practical utility; (b) the accuracy of the agency's estimate of
the burden of the collection of information; (c) ways to enhance the quality, utility,
and clarity of the information to be collected; (d) ways to minimize the burden of the
collection of information on respondents, including through the use of automated
collection techniques or other forms of information technology; and (e) estimates of
capital or start-up costs and costs of operation, maintenance; and purchase of
services to provide information.
There is a far simpler and easier method for the IRS to obtain the necessary information
than adding the proposed Statement of Foreign Financial Assets: Have the current FBAR
(Form TD F 90-22.1) submitted with the tax return rather than being sent to the Detroit
Computing Center with a different deadline. There would be numerous benefits to the
IRS and the public if this were adopted rather than the proposed Statement of Foreign
Financial Assets:
1. Improvements with the quality of the information collected. Today, many
taxpayers are (a) unaware of the requirement to file the FBAR and (b) are
unaware that the deadline for this form is June 30th (rather than the due date ofthe
tax return). Converting the FBAR so that it is filed with the tax return (with a due
date of April 15 th or October 15 th (with a valid extension) would make lives far
easier for the public, tax professionals, and the IRS.
2. Lessening of Paperwork Burden. By not adding a duplicative Statement of
Foreign Financial Assets (the information being requested is almost identical with
the FBAR) the paperwork burden would not be increased.
3. More information available to the IRS. The IRS would be able to track
infornlation 011 all taxpayers filing FBARs.
P.o. Box 15744 • Irvine, CA 92623·5744 • (714) 225-7877 • Fax (949) 552·6891. Email [email protected]
Web www.claytontax.com • Blog www.taxabletalk.com
Letter to Gerald Shields, Page #2
The only burden that I see is developing a method for the FBARs to be sent to Fn'l"CEN.
While there would be a cost involved, it should be relatively easy to design such a
system.
What I propose will greatly enhance compliance with the current FBAR requirements and
will assist the IRS in selecting whether to audit a taxpayer or transaction with minimal to
no additional burden on the public. I urge the IRS to adopt this rather than burden tax
professionals and the public with a duplicative Statement of Foreign Financial Assets.
s;r]f.'.,rreellyy"
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Russell Fox, EA
Page 1 of 5
Terry Ralph M
From:
Sally Warren [[email protected]]
Sent:
Monday, January 03, 2011 10:53 AM
To:
Terry Ralph M
Subject:
Re: Form 8938 Statement of Foreign Financial Assets
Follow Up Flag: Follow up
Flag Status:
Blue
Dear Mr. Terry,
I offer the following comments on proposed Form 8938 of Foreign Financial
Assets:
1. Part A appears to request the same information as required by the existing
Treasury Form. It is a little difficult to track the maximum value of a savings
account that does not provide regular statements; however, this is a minor point
compared to Part B.
2. Schedule of any stock or security issued by a person other than a U.S. person -
1/19/2011
Page 2 of 5
name, address, description of stock or security by class, issue and type, maximum
value during taxable year. In the case where one's funds are under management,
one does not have regular access to all the requested information. As part of my
reason for having funds managed is to save myself the time involved in
managing the a/c myself, this request would be burdensome especially in the case
of an actively traded account. And, in due course, it would undoubtedly lead to
increased fees from brokerages / investment managers who would ultimately
have to provide the requested information.
3. Setting "the aggregate value at more than $50,000" does not strike me as the
best approach. It might be better to set an individual holding limit or raise the
aggregate amount.
4. Whereas the existing Treasury Form is required of anyone having signature
authority over a foreign bank account, which in most cases would be expatriates,
the new form appears to require anyone whether expatriate or not to complete the
form. I believe it should be required of anyone with foreign assets, otherwise it
would discriminate against expatriates. Most U.S. expatriates I know keep their
investments in U.S. markets. In a global world, this form seems to be trying to
get Americans to keep their assets in the U.S. domestic markets. That would be
foolish from an investment point of view with an eye on diversification.
1/19/2011
Page 3 of 5
5. It is not clear to me what the aim of tracking such information is. I would
rather the U.S. close a loop hole I see in Social Security payments - spousal
payments to non-Americans married to Americans in the case where the
American files singly (not jointly) to avoid declaring the spouse's income. I do
no myself like having my tax dollars go to making payments to husbands of
friends who have never contributed to the U.S. Social Security System and who
have never paid a $1.00 of tax to the U.S. At a minimum, for such non-American
spouses to qualify for spousal social security payments, there should be a prerequisite that the American and non-American spouse file a 1040 jointly.
Sally Warren
On 15 déc. 10, at 21:48, Terry Ralph M wrote:
Ms. Warren,
In response to your request we are providing you with a link to the Form
that was submitted as part of the Proposed Collection. The link below will
download a PDF of the Form 8938.
http://www.reginfo.gov/public/do/DownloadDocument?
documentID=202248&version=1
1/19/2011
Page 4 of 5
Thanks
Ralph M. Terry
Tax Analyst, Tax Forms and Publications
Special Products Section
202 622 8144 | SE:W:CAR:MP:T:T:SP | Internal Revenue Service | OMB Unit
Constitution Ave, NW, Washington, DC 20224 | Room 6129
| 1111
-----Original Message----From: Sally Warren [mailto:[email protected]]
Sent: Tuesday, December 14, 2010 3:48 PM
To: Terry Ralph M
Subject: Form 8938 Statement of Foreign Financial
Assets
Importance: High
Dear Mr. Terry,
Please send me a copy of the subject draft form.
should like to
comment on it prior to January 3, 2011.
1/19/2011
I
Page 5 of 5
Thank you.
Sally Warren
1/19/2011
SMITH CARMICHAEL CONSULTING
MEMORANDUM
Date:
December 27,2010
To:
Mr. Gerald Shields
From:
Gregory Smith
Dear Mr. Shields,
As requested, please fInd below comments on the draft Form 8938.
1. The form has a lot of potential for identity theft if put in the wrong hands - Suggestion
- only report the last 4 digits of the bank account number.
2. Part B - Are you saying to report an inventory of all stocks held in foreign brokereage
accounts? If so, this would cause undue hardship in the amount of time it would take to
gather this information and report it on this form, whereas the maximum value amounts
would all ready presumably be reported in Part A. Suggestion - Remove Part B
3. The $50,000 threshold is too low and would require far too much work for too many
taxpayers not to mention the resources required by the IRS to administrate the forms.
Raising the threshold would reduce the burden on the taxpayer and the IRS without any
material loss in benefIt or information. Suggestion - Increase the $50,000 aggregate
value to something more material e.g. $500,000.
4. Since all of this information can be obtained by the IRS through diplomatic channels
with countries that have signed bi-Iateral income tax treaties, the form should only need
to be completed for fInancial accounts in jurisdictions that have not signed a bi-lateral
income tax treaty. Suggestion - eliminate the requirement of filing this fonn if all
bank accounts are held in the taxpayers country of residence and the resident
country has entered into a bi-Iateral treaty arrangement for the sharing of
information.
5. Reporting the maximum value in each account represents an inordinate amount of
research time for the taxpayer with no real value to the number reported, since the
maximum value during the year could include transfers from various accounts.
Suggestion - to replace the maximum value with thresholds of maximum value.
For example check the box: $500,000 - $1,000,000 - $1,000,000 - $1,500,000 over
$2,000,000 etc
23 RUE DU MONTPARNASSE • PARIS/FRANCE • 75006
,
-2-
DECEMBER 27,
2010
6. The redundancy in the questions on the form is shocking. Nearly every question on the
form is a duplicate to a question or information all ready required to be filed by a
taxpayer. Suggestion - Eliminate the FBAR (TD F 90-22.1) fonn and let this fonn
replace it since it will be part of the tax return with presumably the same due date
as the tax return which will allow tax preparers to help clients report accurate
infonnation in a timely manner. Remove Part D since this is all ready required on
Fonns 5471 and Forms 8865.
Please feel free to contact me if you have any questions.
Mr. Shields:
December 17, 2010
I am a United States citizen living in the country of France. I have recently
reviewed a draft copy ofthe proposed form 8938 - STATEMENT OF FOREIGN
FINANCIAL ASSETS and have the following comments.
Living in a foreign country already brings its own set of challenges. Having to
adjust to a different cultural, learn a foreign language and submit the mountain
of paperwork required by the foreign country in order to stay is stressful in
itself.
By living in France we are required to file both a US Income Tax return as well
as an Income Tax return in France. As you know, filling out and filing a US
income tax return requires many, many hours. Add to it the additional time to
prepare and file a French tax return causes one to have considerable time just
in filing income tax returns for the two countries.
In my review of this new form I don't find the information that is being
gathered to be of significant benefit to the US government. With all the paper
work that is currently being filled out by US citizens living abroad I find
additional forms unnecessary. Here are just a few that I was able to find on the
irs.gov website:
Form TD F 90-22.1- Report of Foreign Bank and Financial Accounts
Form 5471- Information Return of U.S. Persons With Respect To Certain
Foreign Corporations
Form 3520 - Annual Return to Report Transactions with Foreign Trusts and
Receipt of Certain Foreign Gifts
Form 8865 - Return of U.S. Persons With Respect to Certain Foreign
Partnerships
In my opinion, an additional form that is estimated to take a little over an hour
to complete, is repetitive, unnecessary and unwanted.
Thank you for your time.
Stephen l\II Hughey
Mr. Gerald Shields
Internal Revenue Service
Room 6129
1111 Constitution Avenue N.W.
Washington D.C. 20224
U.S.A.
December 31, 2010
Dear Mr. Shields,
In 1959 my small business career in Bordeaux (France) began at age 25, trading in
French wines.
Since then I held diverse responsibilities in both private and public sectors across several
jurisdictions and languages. Intense world-wide regulation of alcoholic beverages obliged
much experience of compliance, regulatory, authentication and tax issues. I have also
held quasi-enforcement responsibilities as appraiser & agent of marine insurers with
special reference to fraudulent claims and salvage fraud, and served as arbitrator. Issues
of regulation, accountability, security and good order between private and public interests
have been of more concern during my career than for the average American.
Congress' attempts to regulate economic activity of overseas US citizens have gradually
lost my respect and confidence. To justify these remarks would take many pages. We
are concerned today with the 8938 'package' of requirements. You have heard from
organizations such as AARO. An individual may speak more bluntly than an
organisation; the 8938 package shows bad faith at several points, at other points is
downright stupid because unworkable, cannot possibly justify its combined public and
private sector costs, is a property census not an income tax measure (thereby risking
constitutional objections), will further damage our relationships with other nations, and
will alienate a great number of Americans, paradoxically those of above-average ethical
and educational level.
The 8938 'package' has in common with 'Controlled Foreign Corporations' rules, with
minimum interest rules, with the reporting obligations of 90-22 form, and other
compliance notions, an insincere relation of detail to purpose. The true purposes are to
facilitate prosecution of big-time income tax evaders, when detected, and to frighten US
expatriates by terrific penalties for non-compliance. Hence its sweeping ambiguous and
evasive language.
8938 worsens an already bad situation. IRS agents abroad are in the silly position of
telling worried citizens to ignore some published rule, and even to lie, because, in the
words of a senior agent (London) to me in the 1980s 'we certainly do not have people
like you in mind.' In 2005 the US Paris embassy advised perjury as a solution to
incoherently worded information forms. In the 1970s my USA accountant billed me for
17,000 USD of time in a vain effort to educate a young IRS 'auditor' about Controlled
Foreign Corporations -what they were, what the idea was, how the idea mismatched the
language and reporting forms, etc. This agent abandoned the 'audit' unfinished, with no
apology no explanation and no conclusion. Sidney Roberts Esq. (Roberts & Holland),
who drafted that legislation for the Kennedy administration, told me in person in New
York City in the 1960s that after Congress turned his drafts into legislation no one in this
world any more understood 'Foreign Controlled Corporations.'
Many particulars of the 8938 form are impractical. Part B asks for the address of an
'issuer of a security' other than a US person. What bank or brokerage statement of non
US securities furnishes 'issuer addresses? What is the 'address' of a Vietnamese
'investment certificate'? Of a Czech company when listed on the Warsaw stock
exchange?
Demands for 'maximum value during the taxable year' are nearly insane. (Does
Congress mean calendar year?) Illustration: the maximum USD year 2010 value of 100
shares of a Brazilian stock is a function of two independent variables: the highest daily
price in Brazilian Reals and the USD/Brazilian Real daily exchange rate. Solution
requires approximately 240 multiplications, one for each business day. The IRS
represents that the total time to complete 8938 is one hour. There is a short ugly name
for that representation.
Mr. Shields, French Spanish and Italian indirect tax authorities are unable to collect an
estimated four-tenths of value-added taxes due from the private sector. I have worked at
grass-roots level in two of those jurisdictions and am here with simple messages.
The government that lies to its people will receive back lies from that people.
Where tax demands & procedures are perceived as deeply unfair, people somehow evade
them.
Part C is scandalously vague. It asks after 'instrument, contract or interest'. What is an
'interest'? I have an 'interest' in a country house in Italy bequeathed to me per a
relative's testament. What is the 'address of the issuer' of this interest? Is it the executor
or the testator who isn't yet quite dead? What is its maximum value in 201 O?
The French marriage contract with my wife separates our properties but stipulate
exceptions for certain property now mine on which she has a potential claim. It is,
incontestably, a financial contract. Who issued this contract and from what address? The
law firm that drew it or the Mayor's office of Bordeaux, France? What was its
'maximum value' in 201O? And to whom?
Part D asks after an interest in a 'foreign entity.' Name, address, description and
maximum value during the 'taxable year.' Given past experience I contend that the IRS
cannot word a definition of what is or is not a 'foreign entity' understandable to a literate
businessman. Our tax code is already the laughing stock of the educated English
speaking world. We do not need yet more of this secret language which means what a
bureaucrat wishes it to mean.
By this point an unstated Congressional intention emerges. US citizens abroad will have
to engage US tax counsel in order to complete 8938. That advice will cost between 200
and 600 dollars an hour. It will require ability to use a computer and the internet. It will
take a great deal oftime. It will cost a great deal. To assert that it will effect 'only' some
350,000 of us is another falsehood, and is infuriating. It will affect at least two million
odd, likely nearer four million. The information will be inaccurate and incomplete.
Taxpayers will make a stab at the right numbers. As with 90-22, wrong-doers will not
file or will file falsely.
When I was young every overseas American I knew complied with all IRS requirements.
J can assure you that today that isn't so. Many overseas Americans don't even know of
their duties; the 90-22 is news to them!! Some file a 1040, others imagine themselves in
compliance insofar as they honestly file and pay taxes where they live and work.
I have studied 8938 carefully and gone back over the five decades of my own nit-picking
compliance with every new batch of requirements. I cannot find a single instance where
these forms and definitions peculiar to overseas Americans achieved anything/or the US
Treasury Department. The menaces, suspiciousness and complexity of these measures
contributed, in 1996, to closing up my modest but profitable self-owned company rather
than expanding it by adding younger partners.
Form 8938 will send a great number of creative and enterprising Americans to form
8854. That is my sad prediction here.
With regret at the length of this letter and thanks for your attention, I am, Sir,
Your~ sincerely,
~
Stephen J. Schneider
13 Kalograion Street, 1021, Nicosia, Cyprus. [email protected]
formerly:
Financial Controller
Atlantic & Schneider Ltd (Jersey, Channel Islands)
Partner
Bolter, Schneider & Cie (Bordeaux, France)
Chairman
The Octagon Wine Company (Richmond, UK)
CEO
The Schneider Corporation (Cambridge, Mass.)
Stephen Woynar
14 Allee de la Cauviniere
78112 Fourqueux, France
January 2
nd
,
2011
Mr.Gerald Shields
IRS
Room 6129
1111 Constitution Avenue
NW Washington, DC 20244
U.S.A.
Dear Mr. Shields,
I have been informed by the Association of Amercians Resident Overseas of Paris, France that the
Internal Revenue Service is soliciting comments on the draft of Form 8938 as "part of its effort to
reduce paperwork and respondents burden".
, wish to comment as follows:
1)
Is there a real practical need for requesting the information on Form 8938 which appears to
already covered to a large extent in Form TO F 90-221which is already filed by Americans filing tax
returns from overseas?
2)
I am also in favor of minimizing the burden of record-keeping and the collection of information
on respondents.
I wish to thank you considering the above thoughts about Form 8938..
Sincerely yours,
Stephen Woynar
Dear Mr. Terry:
Thank you for today's discussion and help.
My questions related to form 8983, to 6038d and to next years required information regulations
for form 1040 and for small corporate entities [where one or two people own the corporation].
What is deemed a reportable asset?
Would you provide an answer on each of the following
1. a taxpayer purchased a building lot in a foreign nation in his or her personal
name and that lot or the house and lot in the foreign nation together exceed
$50,000 in estimated current value but are shown on the rolls of the foreign
nation for real estate tax purposes as less than $4,000 and the taxpayer paid
only a few dollars for the lot in 2010.
Lets say
1a. the taxpayer paid $90,000 for it; its estimated value is now $50,000 and
the official tax register of the foreign country shows its value as $4,000.
1b. the taxpayer paid $4,000, its estimated market value at $50,000 and the
foreign country tax rolls show it at $200,000
etc.
How should such an asset be classified and how should the value of such an asset be reported?
2. I understand that in many foreign jurisdictions, real estate is sometimes purchased in
a corporation or other entity, which itself might be incorporated in a second foreign
jurisdiction. When this occurs the question of how to classify the asset for the different
sections of form 8983 become an issue. Where can a taxpayer seek asset
classification and valuation advise for filing purposes of the act?
2a. A U. S. Taxpayer, purchases real estate in a foreign jurisdiction A, but the
ownership is not fee simple, instead it might be as tenants in common with a
foreigner because of foreign ownership laws, or the taxpayer ownership might be
represented in a stock, designated rights security, etc..
2b. A developer instead of subdividing the land into lots merely provides ownership
to the purchaser based on a certificate to rights within the developed community
and sometimes those rights are merely life estate rights.
The only value of the property obtainable is the purchase paid price, and the
continuing value of the shares are anyone's guess, there may be recording of
the sale in the country in which the real estate is sited or it may not.
How would such ownership be classed and how reported on form 8983?
In other words, does the purpose of the purchase affect the requirement to report.
Which evaluation methods is required, preferable, and which are allowed and must a taxpayer
reevaluate the value of the holding every year?
Please provide a copy with instructions of the form 8983.
This area of practice is not well known to many accounting practitioners. I am wondering if the
IRS would consider commissioning the development of a CPE interactive digital instructional
program for practitioners to use to develop expertise in this area of concern.
I would like to talk with the service about opportunities in producing it such a route to educating
practitioners and affected taxpayers about this new requirement is considered.
written by
Sterling Stoudenmire, III CPA
Tatyana Schmidt, 2, impasse de la Maitrise - 71400 Autun, FRANCE
Ellen Schmidt, 61, rue de la Grange aux Belles - 75010 Paris, FRANCE
MEMBERS OF AARO, France
Mr. Gerald Shields
IRS, Room 6129
1111 Constitution Avenue, NW,
Washington DC 20224
SUbject: Draft Form 8938
Paris, 20 decembre 2010
Sir,
In reply to the Internal Revenue Service's call for comments on the draft of the new tax form 8938 destined
to be filed as part of the individual income tax return of certain US tax filers, you will find hereafter our
observations.
• The threshold doesn't comply with the Foreign Earned Income Exclusion (form 2555-EZ) stated for
the 2009 tax return, which is 91,400 USD.
•
Moreover, this threshold seems low since the current exchange rate would set this threshold for US
tax filers in Europe at approximately 38,000 Euros.
•
The information requested will significantly increase the amount of data required to file a tax return
for expatriates or persons holding assets abroad as well as impose additional record-keeping and
reporting obligations on Americans filing tax returns from overseas.
•
Furthermore, these processes will, in and of themselves, place yet another heavy burden on the
American tax payer with no dear instructions to date, not to mention the fact that banks abroad will
consider doing business with Americans living abroad as a liability.
•
What about Financial Privacy? Is the collection of such data necessary for the proper performance
of the functions of the IRS, including whether the information shall or shall not have practical utility?
•
How can expatriates be sure that any data provided is protected from public exposure such as the
WikiLeaks scandal?
•
We Americans living abroad consider ourselves as "unpaid Ambassadors" representing our country
in a variety of positions and capacities as well as positively characterizing and defending our
country's political and social positions.
•
The goodwill we thus create will be jeopardized.
We would like to add that I, Tatyana Schmidt, a senior US citizen and mother to Ellen D. Schmidt, do not
qualify for Medicare due to the fact that I reside abroad and what is more, am subject to double taxation.
YO~~'~l'
--,r
~m~_
Elen D. Schmidt
| File Type | application/pdf |
| File Modified | 2011-03-31 |
| File Created | 2011-03-31 |