IRS issues important regulations on reporting of foreign financial assets

The IRS on December 14 released temporary and proposed regulations implementing Code section 6038D, which requires reporting of certain foreign accounts and assets by certain individuals and domestic entities. Section 6038D, which was added to the Code by section 511 of the Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, 124 Stat. 71, (the HIRE Act), is effective for tax years beginning after March 18, 2010.

To comply with section 6038D, taxpayers must file a properly completed Form 8938, Statement of Specified Foreign Financial Assets, with their federal income tax return. The final Form 8938 and instructions were released on December 17, 2011, and December 19, 2011, respectively. As described more fully below, individuals subject to section 6038D reporting will begin filing Form 8938 with their 2011 federal income tax returns. Entities will not be required to file Form 8938 until they file their 2012 federal income tax returns.