Individuals Must Report Foreign Financial Assets

Types : Alerts

Individuals Must Report Foreign Financial Assets

Beginning in 2011, any individual who holds an interest in “specified foreign financial assets” the aggregate value of which exceeds $50,000, must attach certain information to his or her tax return.  This is in addition to filing the required FBAR report.  The penalty for failure to furnish the information is $10,000.  If the failure continues for more than 90 days after the date the taxpayer is notified by the IRS, the penalty increases $10,000 for each 30 day period during which the failure continues up to a cap of $50,000.  “Specified foreign assets” would include limited partnership interests in a foreign hedge fund or private equity fund and stock in a passive foreign investment company.

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Possible Repeal of New Form 1099 Reporting Requirements  

Small businesses have been up in arms about the expansion of Form 1099 reporting.  Under the old rules, any person engaged in a trade or business who paid $600 or more in a year in compensation, profits or passive income had to issue a Form 1099 reporting the payments.  Generally, no Form 1099 was required if the recipient of the payments was a corporation or if the payment was made for the purchase of property.  Beginning in 2012, payments made to corporations and amounts paid for property are subject to Form 1099 reporting.

Since the recent elections, the President and even Senator Baucus (who introduced the legislation that increased the reporting) have indicated a willingness to consider a modification to relieve the burden the new requirements impose on small businesses.

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