The New York State Society of CPAs has written a
The NYSSCPA outlined several areas of
The proposed regulations are amendments to income tax regulations that determine what constitutes a foreign asset and what information related to foreign assets is required to be reported on the new Form 8938, which is to be included with a taxpayer’s annual income tax return. The amendments also include a proposed regulation describing the requirements for certain domestic entities to report foreign financial assets in the same manner as an individual, which go into effect for taxable years beginning after December 2011.
The regulations lack examples indicating what is considered a foreign asset and how it should be reported, noted Melissa Gillespie, who chairs the NYSSCPA’s International Taxation Committee. She said additional guidance is also needed to outline what is considered to be a specified foreign financial asset and how it should be valued and reported.
The NYSSCPA also took issue with the penalty structure in the proposed regulations, saying it could unfairly punish taxpayers whose foreign assets are near the threshold for filing. Taxpayers whose foreign assets may have originally been valued at just below the threshold limit for filing the Form 8938, and later are determined to be valued at slightly over the threshold, could be hit with large penalties.
“If you make a mistake in the valuation, you can be hit with a $10,000 penalty,” Gillespie said. “We asked for some leeway there, especially when it comes to the first year of valuation.”
The NYSSCPA recommends instead a range of penalties to accurately reflect the scope of the error. It also said consideration should be given to individuals or companies that are showing due diligence in fixing the errors.
The temporary regulations were put into effect on Dec. 19, 2011. The comment period for the proposed regulations closed on March 19.