Warning: TurboTax, Foreign Assets & Form 8938
Jan 30th 2012, 8:29 pm
#16
Wondering if...
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Joined: Apr 2009
Location: Clarence, NY
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Re: Warning: TurboTax, Foreign Assets & Form 8938
It's an outfit called The Pensions Trust. It is my final salary pension with the Youth Hostels Association (England & Wales) for whom I worked in the 1980s. Salary was tiny, so pension is tiny too. It was employer's contributions only.
This is the part of the instructions I was relying on;
If you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest as of the last day of the tax year, use a value of zero as the maximum value of the asset.
This is the part of the instructions I was relying on;
If you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest as of the last day of the tax year, use a value of zero as the maximum value of the asset.
I can a real mess developing....
Jan 30th 2012, 8:33 pm
#17
Heading for Poppyland
Joined: Jul 2007
Location: North Norfolk and northern New York State
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Re: Warning: TurboTax, Foreign Assets & Form 8938
If I could move to the UK and abandon all ties to the US, I'd do it. Not really possible now with my Social Security, 403b, IRAs etc. What a nightmare.
Jan 30th 2012, 8:38 pm
#18
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Re: Warning: TurboTax, Foreign Assets & Form 8938
So, playing devil's advocate, if it's a trust, should you be reporting an interest in a foreign trust, which have massive penalties if you haven't filed as required? I don't know the answer to this!
I agree, it sounds straightforward.
After FBAR, paranoia reigns!
After FBAR, paranoia reigns!
Jan 30th 2012, 11:22 pm
#19
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Joined: Jan 2012
Location: Mesa, Arizona
Posts: 64
Re: Warning: TurboTax, Foreign Assets & Form 8938
'Tis the tax season!
Sorry for the length of what follows, but if you are going to use Turbotax and you have any foreign (non-US) assets, please be aware...
The new IRS foreign asset reporting requirement (Form 8938) has been implemented by Turbotax in a...'strange'...manner that can get your filing rejected.
At some stage during collecting your income information TurboTax points out that the IRS now requires foreign assets to be reported, and simply asks if you have any foreign assets. A simple Y/N question. If, like me, you answer 'Yes' then the software generates a partial Form 8938 and, from that point on, requires that the form be completed.
Note that the software logic does not take into account the reporting thresholds. It doesn't then, for instance, ask for the maximum balance and then skip all the paperwork if the balance is lower than reporting requirements. Many of you will not meet the reporting thresholds, and therefore do not need to complete and return a Form 8938.
So far, this isn't a problem if you decide to fill out the form anyway - except that it currently only allows for a single account to be reported.
The problem arises when you figure out that, for tax return purposes, as you do not meet the thresholds, you should simply answer 'No' to the question. If you go back and do that then the Form 8938 disappears from your workflow. Job done. Or so it seems.
The error is that Turbotax does not remove the partially completed Form 8938 details from either the paperwork (if you print and mail your return) or the e-filing data. I discovered this when both my Federal and State e-filings were rejected. There is no way to correct this other than to delete the data/files for your return and start from scratch again. Once you say 'Yes' to that simple question you are trapped.
I'm trying to communicate all this to TurboTax but figured it would be worth posting it here as well because I am sure I am not going to be the only expat caught out by this bug in the software.
I hope this helps someone!
Sorry for the length of what follows, but if you are going to use Turbotax and you have any foreign (non-US) assets, please be aware...
The new IRS foreign asset reporting requirement (Form 8938) has been implemented by Turbotax in a...'strange'...manner that can get your filing rejected.
At some stage during collecting your income information TurboTax points out that the IRS now requires foreign assets to be reported, and simply asks if you have any foreign assets. A simple Y/N question. If, like me, you answer 'Yes' then the software generates a partial Form 8938 and, from that point on, requires that the form be completed.
Note that the software logic does not take into account the reporting thresholds. It doesn't then, for instance, ask for the maximum balance and then skip all the paperwork if the balance is lower than reporting requirements. Many of you will not meet the reporting thresholds, and therefore do not need to complete and return a Form 8938.
So far, this isn't a problem if you decide to fill out the form anyway - except that it currently only allows for a single account to be reported.
The problem arises when you figure out that, for tax return purposes, as you do not meet the thresholds, you should simply answer 'No' to the question. If you go back and do that then the Form 8938 disappears from your workflow. Job done. Or so it seems.
The error is that Turbotax does not remove the partially completed Form 8938 details from either the paperwork (if you print and mail your return) or the e-filing data. I discovered this when both my Federal and State e-filings were rejected. There is no way to correct this other than to delete the data/files for your return and start from scratch again. Once you say 'Yes' to that simple question you are trapped.
I'm trying to communicate all this to TurboTax but figured it would be worth posting it here as well because I am sure I am not going to be the only expat caught out by this bug in the software.
I hope this helps someone!
Feb 2nd 2012, 1:04 am
#20
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Joined: Jun 2004
Location: Hoboken, NJ
Posts: 54
Re: Warning: TurboTax, Foreign Assets & Form 8938
"An interest in foreign real estate is not a specified foreign financial asset, but shares in a foreign corporation that only holds the real estate is such an asset."
I don't know if that changes when the property is rented out. If so, it's also unclear as to what value to place on the property. Is is just the equity one holds or the market value of the property?
Oh I love tax season......
Feb 2nd 2012, 3:21 pm
#21
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Re: Warning: TurboTax, Foreign Assets & Form 8938
From that perspective, I would take the view that if you have a declarable cash flow from the foreign asset, it would be best to include the asset on 8938. As to what happens if you declare the income on 1040, but don't include the source on 8938, I have no idea. It would seem to be illogical to enforce a reporting penalty on the source of income when the income and it's source have been reported on 1040, but the tax code is always full of surprises. What they really want are the assets and income that should be reported, but aren't reported.
Let's be realistic. The FBAR has been around since the 1970's. It was only in March(?) of last year that the instructions for FBAR were finalized. Right now, it's difficult to understand what is meant exactly as regards the instructions for 8938. With April 17th approaching for US residents, I hope some form of clarification arrives soon.
Then again, as always, I could be wrong.
Last edited by theOAP; Feb 2nd 2012 at 3:42 pm.
Feb 12th 2012, 5:58 pm
#22
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Re: Warning: TurboTax, Foreign Assets & Form 8938
Should endowment policies be reported on Form 8938? I have read and reread the irs instructions but still cannot work out whether they should be included or not.
Feb 13th 2012, 12:40 am
#23
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Joined: Jul 2007
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Posts: 14,539
Re: Warning: TurboTax, Foreign Assets & Form 8938
I just filled out my FBAR for 2011. I used the fillable PDF form, and copied last year's form with the new data for the highest balance.. Also added one new bank account. Probably took me twenty minutes, I'll print it at work tomorrow, sign it and get my wife to sign it, send it out via ordinary mail Tuesday. My current strategy is not to waste money on registered mail or similar, but to send it early enough in the year that I can wait ninety days and call the toll free number to get them to confirm they received it, and still be within the filing deadline.
Feb 13th 2012, 2:11 pm
#24
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Joined: Aug 2009
Location: Houston, Tx
Posts: 2,280
Re: Warning: TurboTax, Foreign Assets & Form 8938
I hate this time of year. I'm trying to bring all my assets into the US so I don't have the complication of figuring out values of foriegn assets, interest paid etc...
It's a real pain having to go through and manually calculate interest earned on savings in the UK (I'm yet to find a bank that will print off interest and tax for the calendar year as opposed to the UK financial year...)
It has to be the worst tax and reporting system in the world - I'd love to know if there exists a worse system somewhere... (I'm sure there does and I'm being overly dramatic but I hate the system here, it sucks). All emphasis is on the individual, the government just makes it complicated so they can trip you up and make more money if you can't follow their ludicrous policies...
(sorry for the rant - think I need some more coffee this morning!)
It's a real pain having to go through and manually calculate interest earned on savings in the UK (I'm yet to find a bank that will print off interest and tax for the calendar year as opposed to the UK financial year...)
It has to be the worst tax and reporting system in the world - I'd love to know if there exists a worse system somewhere... (I'm sure there does and I'm being overly dramatic but I hate the system here, it sucks). All emphasis is on the individual, the government just makes it complicated so they can trip you up and make more money if you can't follow their ludicrous policies...
(sorry for the rant - think I need some more coffee this morning!)
Feb 13th 2012, 2:50 pm
#25
Wondering if...
Thread Starter
Joined: Apr 2009
Location: Clarence, NY
Posts: 1,214
Re: Warning: TurboTax, Foreign Assets & Form 8938
I hate this time of year. I'm trying to bring all my assets into the US so I don't have the complication of figuring out values of foriegn assets, interest paid etc...
It's a real pain having to go through and manually calculate interest earned on savings in the UK (I'm yet to find a bank that will print off interest and tax for the calendar year as opposed to the UK financial year...)
It has to be the worst tax and reporting system in the world - I'd love to know if there exists a worse system somewhere... (I'm sure there does and I'm being overly dramatic but I hate the system here, it sucks). All emphasis is on the individual, the government just makes it complicated so they can trip you up and make more money if you can't follow their ludicrous policies...
(sorry for the rant - think I need some more coffee this morning!)
It's a real pain having to go through and manually calculate interest earned on savings in the UK (I'm yet to find a bank that will print off interest and tax for the calendar year as opposed to the UK financial year...)
It has to be the worst tax and reporting system in the world - I'd love to know if there exists a worse system somewhere... (I'm sure there does and I'm being overly dramatic but I hate the system here, it sucks). All emphasis is on the individual, the government just makes it complicated so they can trip you up and make more money if you can't follow their ludicrous policies...
(sorry for the rant - think I need some more coffee this morning!)
A final endowment matures in May, then it is just straightforward bank accounts to worry about, and the plan is to keep them well below Form 8938 reporting levels. I can live with the FBAR requirement - no great trouble and a small irritiation for the benefit of overseas bank accounts. Then, as long as the rules don't change much, no more grief until such time as pensions start paying - and who knows what the rules will be by then?
Feb 13th 2012, 3:49 pm
#26
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Re: Warning: TurboTax, Foreign Assets & Form 8938
Feb 13th 2012, 6:34 pm
#27
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Re: Warning: TurboTax, Foreign Assets & Form 8938
Found this link which seems to indicate that our Life insurance policy is subject to reporting purposes......really?
http://www.blackmankallick.com/artic...ancial-assets/
surely - if it's only payable in the event of death as it comes under any "estate tax" ....and thus taxable then, but now?....
this would push the OH and myself over the limit as we both kept our life insurance running in the UK..
http://www.blackmankallick.com/artic...ancial-assets/
surely - if it's only payable in the event of death as it comes under any "estate tax" ....and thus taxable then, but now?....
this would push the OH and myself over the limit as we both kept our life insurance running in the UK..
Feb 13th 2012, 6:54 pm
#28
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Joined: Aug 2003
Location: NJ
Posts: 1,272
Re: Warning: TurboTax, Foreign Assets & Form 8938
Found this link which seems to indicate that our Life insurance policy is subject to reporting purposes......really?
http://www.blackmankallick.com/artic...ancial-assets/
surely - if it's only payable in the event of death as it comes under any "estate tax" ....and thus taxable then, but now?....
this would push the OH and myself over the limit as we both kept our life insurance running in the UK..
http://www.blackmankallick.com/artic...ancial-assets/
surely - if it's only payable in the event of death as it comes under any "estate tax" ....and thus taxable then, but now?....
this would push the OH and myself over the limit as we both kept our life insurance running in the UK..
So it looks like we have to report endowments too. I assume only the cash surrender values are the figures needed. I now need to find out if the total of my husband's two small pension plans and the cash surrender value of the endowments take us over the limit. It just gets more complicated every year.
Feb 13th 2012, 7:26 pm
#29
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Location: Manhattan
Posts: 2,913
Re: Warning: TurboTax, Foreign Assets & Form 8938
Thanks for the link theOAP. The article seems to suggest that foreign property does not need to be included in form 8938.
"An interest in foreign real estate is not a specified foreign financial asset, but shares in a foreign corporation that only holds the real estate is such an asset."
I don't know if that changes when the property is rented out. If so, it's also unclear as to what value to place on the property. Is is just the equity one holds or the market value of the property?
Oh I love tax season......
"An interest in foreign real estate is not a specified foreign financial asset, but shares in a foreign corporation that only holds the real estate is such an asset."
I don't know if that changes when the property is rented out. If so, it's also unclear as to what value to place on the property. Is is just the equity one holds or the market value of the property?
Oh I love tax season......
Feb 13th 2012, 8:46 pm
#30
Wondering if...
Thread Starter
Joined: Apr 2009
Location: Clarence, NY
Posts: 1,214
Re: Warning: TurboTax, Foreign Assets & Form 8938
Found this link which seems to indicate that our Life insurance policy is subject to reporting purposes......really?
http://www.blackmankallick.com/artic...ancial-assets/
surely - if it's only payable in the event of death as it comes under any "estate tax" ....and thus taxable then, but now?....
this would push the OH and myself over the limit as we both kept our life insurance running in the UK..
http://www.blackmankallick.com/artic...ancial-assets/
surely - if it's only payable in the event of death as it comes under any "estate tax" ....and thus taxable then, but now?....
this would push the OH and myself over the limit as we both kept our life insurance running in the UK..
I assume the note in the article about life insurance arises from the IRS instruction of:
"c. Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person."
However, I can't find any reference to "life insurance" in the IRS instructions.
So yes, that (c) could be interpreted that way. But if you think too much about it, if a life insurance policy comes under the definition of (c) then what about a house insurance policy? Would that not be similarly captured under the above broad definition? So penguinbar's comment re. foreign real estate is one thing, but what about an insurance policy on the property?
Just playing with ideas!
