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Warning: TurboTax, Foreign Assets & Form 8938

Warning: TurboTax, Foreign Assets & Form 8938

Old Feb 13th 2012, 9:08 pm
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

I may be a bit dense here, but what actually is the point of this form? Thinking about the pensions etc if you are not recieving any benefit under them ( and we wont for many years) what is the gain of the US knowing about them?
We are not even PR's yet and are planning on going home before we draw anything on these pensions.
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Old Feb 14th 2012, 7:36 am
  #32  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by mandpete
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.
I won't comment on Form 8938, but for anyone following this, you should be aware of the instructions for FBAR.

From the General Definitions for FBAR, page 6:

".....A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy),....."
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Old Feb 14th 2012, 9:01 am
  #33  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

The increased attention both foreign and domestic pensions are receiving may be the consequence of a domestic problem (and 1099-R).

IRS targets retiree tax cheats
"In a tax gap study for 2001, the IRS estimated that as much as $4.2 billion could be attributed to underreported retirement income."

http://money.msn.com/tax-tips/post.a...3-0da4977341b3

The (redacted) report:
http://www.treasury.gov/tigta/auditr...01230011fr.pdf
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Old Feb 14th 2012, 11:33 am
  #34  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by bilbos92
I may be a bit dense here, but what actually is the point of this form? Thinking about the pensions etc if you are not recieving any benefit under them ( and we wont for many years) what is the gain of the US knowing about them?
We are not even PR's yet and are planning on going home before we draw anything on these pensions.
The US might not actually recognize a foreign pension as qualifying for tax deferral of contributions or gains unless it is covered by a Treaty.
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Old Feb 15th 2012, 8:41 pm
  #35  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Very interesting article (courtesy ACA). It's a week old, and I've yet to see anything in the UK press about it.

http://www.nytimes.com/2012/02/09/bu...asion.htm?_r=2
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Old Feb 17th 2012, 6:39 pm
  #36  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by Bink
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).
I don't think so, I've lived various places and I've never come across anything as crazy as the US system. The Russian system has a reputation as being pretty terrible.

The problem with the US system is that there are actually three competing systems, the system for "US persons", the system for "non-immigrant aliens" and the other for "non-resident aliens". Which comes about because the US is the only country taxing people on the basis of their citizenship rather than their residency.

So if you are a non-immigrant alien the system works pretty much like it does elsewhere in the world, i.e. if you live in the US you pay taxes there, if you leave, you don't.

What I found amusing was reading Mitt Romney's tax return, which is over a hundred pages long and you learn very little from it, because of all the blind trusts and foreign holding companies.

And also the irony that TurboTax is made by a Canadian company.
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Old Feb 17th 2012, 6:45 pm
  #37  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by theOAP
Very interesting article (courtesy ACA). It's a week old, and I've yet to see anything in the UK press about it.

http://www.nytimes.com/2012/02/09/bu...asion.htm?_r=2
That is a very interesting article, Canada at the moment though is giving the IRS the finger, and I doubt they're going to change their mind given that there are more US citizens living in Canada than any other foreign country. The only way I can see the IRS getting their way is if there is a blanket exemption from penalties except in cases where there was criminal intent. Which essentially means no-one will bother to file.
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Old Feb 19th 2012, 10:02 pm
  #38  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Just found this thread. So is anybody thinking about not doing the 8938?

I tried. Impossible to get a figure on my husband's UK pension. Made several calls and they said they would have to work on it. Then they just came up with estimated monthly payout after several reminders. So I decided to go with a very old statement with a cash transfer amount---not 12/31/2011 value. It exceeds $200K and thus requires an exact figure instead of ticking a range.

Ok, so now to figure out the form. I got hung up on Part II, #7b Type of foreign entity Partnership, Corporation, Trust, Estate. I dunno. Then #7c Check if foreign entity is a PFIC What does that mean ?

So I decided to call the IRS about the specifics of the form after I had already read everything on the internet about it. When the lady said "this is the first time I've seen this form so bear with me while I read up on it".---well I knew she wasn't going to be helpful. She gave me the most ridiculous answers. So I hung up and called back and said I wanted someone more knowledgeable. Got transferred to the Tax Law department. Mr. Schneider sounded quite intelligent and was very familiar with the form. BUT he gave a scripted answer "Form 8938 is beyond the scope of IRS help-desk and our suggestion is to see a professional tax preparer. Seriously??

So I said "what do you mean it's beyond your scope? You're the IRS. You wrote the tax law. You have to give me an answer." Then he softened and almost chuckled and said, "That's exactly what I told my supervisor when he told me that's what I had to say. What the hell are we getting paid for?" Then we had a nice chat and both agreed it will all shake out and get defined better after this first year. He told me to write down his name and ID and if I have any problems with the IRS to give his details.

Had two TurboTax efile rejections. Spent 1 hour 28 minute on the phone with their Tier 1 and Tier 2. I know they've got some bugs in their coding on this form they need to work out. He told me to delete the form and re-enter. Two more efile rejections.

So yesterday I completely deleted Form 8938 and didn't report the foreign asset on efile attempt #5. Bingo! Within 30 minutes my return was accepted by the IRS. Does that in any way indicate TurboTax has a bug? I think so.

I'm sick of Form 8938 and will deal with it next year after the IRS gives more specific direction and TurboTax works out the bugs.
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Old Feb 19th 2012, 10:46 pm
  #39  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by Moxie
Just found this thread. So is anybody thinking about not doing the 8938?

I tried. Impossible to get a figure on my husband's UK pension. Made several calls and they said they would have to work on it. Then they just came up with estimated monthly payout after several reminders. So I decided to go with a very old statement with a cash transfer amount---not 12/31/2011 value. It exceeds $200K and thus requires an exact figure instead of ticking a range.

Ok, so now to figure out the form. I got hung up on Part II, #7b Type of foreign entity Partnership, Corporation, Trust, Estate. I dunno. Then #7c Check if foreign entity is a PFIC What does that mean ?

So I decided to call the IRS about the specifics of the form after I had already read everything on the internet about it. When the lady said "this is the first time I've seen this form so bear with me while I read up on it".---well I knew she wasn't going to be helpful. She gave me the most ridiculous answers. So I hung up and called back and said I wanted someone more knowledgeable. Got transferred to the Tax Law department. Mr. Schneider sounded quite intelligent and was very familiar with the form. BUT he gave a scripted answer "Form 8938 is beyond the scope of IRS help-desk and our suggestion is to see a professional tax preparer. Seriously??

So I said "what do you mean it's beyond your scope? You're the IRS. You wrote the tax law. You have to give me an answer." Then he softened and almost chuckled and said, "That's exactly what I told my supervisor when he told me that's what I had to say. What the hell are we getting paid for?" Then we had a nice chat and both agreed it will all shake out and get defined better after this first year. He told me to write down his name and ID and if I have any problems with the IRS to give his details.

Had two TurboTax efile rejections. Spent 1 hour 28 minute on the phone with their Tier 1 and Tier 2. I know they've got some bugs in their coding on this form they need to work out. He told me to delete the form and re-enter. Two more efile rejections.

So yesterday I completely deleted Form 8938 and didn't report the foreign asset on efile attempt #5. Bingo! Within 30 minutes my return was accepted by the IRS. Does that in any way indicate TurboTax has a bug? I think so.

I'm sick of Form 8938 and will deal with it next year after the IRS gives more specific direction and TurboTax works out the bugs.
I'm with you Moxie - I have 2 UK frozen company pension plans with next to nothing in them. We have a life assurance policy with no monetary value unless we die. A bank account with less than 500 quid and hubby's company pension, but no idea which figure the IRS actually want from it. None of this 'earns' us any money so it's not like they are entitled to any tax from nothing! I also gave up!
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Old Feb 20th 2012, 5:57 pm
  #40  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by Moxie
Ok, so now to figure out the form. I got hung up on Part II, #7b Type of foreign entity Partnership, Corporation, Trust, Estate. I dunno. Then #7c Check if foreign entity is a PFIC What does that mean ?
Passive foreign investment company, most usually a foreign corporation under the control or direction of the person filing the return that holds investments, usually done through a BVI, Bermuda, Cayman Islands, etc. corporation.

The reason they're asking I think is because there probably should be a Form 8261 included with your return if you have a PFIC, and must be listed in Part 4.
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Old Feb 20th 2012, 7:15 pm
  #41  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by Steve_
Passive foreign investment company, most usually a foreign corporation under the control or direction of the person filing the return that holds investments, usually done through a BVI, Bermuda, Cayman Islands, etc. corporation.

The reason they're asking I think is because there probably should be a Form 8261 included with your return if you have a PFIC, and must be listed in Part 4.
Well I did find that by google. I found it funny though that neither person at IRS knew, nor was it in the IRS acronym database that Mr. Schneider looked up. Well anyway, the pension has no effect on my taxes, meaning I don't owe more taxes. I'm not hiding any taxable income which I think is their main reason for the new form.

When they come to arrest me for not reporting, I'll let you know. I think they've got bigger fish to fry. I don't have a fear of the IRS I guess some people have. I've tried to file honestly for 40 years...no gimmicks or loopholes. Five years ago I owed an additional $6k so TurboTax figured a penalty. I paper-filed, did not include the penalty, and wrote a statement that I wasn't paying the $300+ penalty. They never contacted me about it.
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Old Feb 20th 2012, 7:48 pm
  #42  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by celticgrid
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 hope this helps someone!
Thanks for raising this issue just before I submitted my tax return with TurboTax! This was going to affect me because I initially answered "Yes" that I have a foreign bank account but then realized later that the thresholds meant that the form doesn't apply to me. Looks like TurboTax knows about the issue and there are instructions here on how to remove the unneeded form:

http://turbotax.intuit.com/support/i.../SLN56550.html
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Old Feb 21st 2012, 9:29 am
  #43  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by Moxie
Just found this thread. So is anybody thinking about not doing the 8938?

I tried. Impossible to get a figure on my husband's UK pension. Made several calls and they said they would have to work on it. Then they just came up with estimated monthly payout after several reminders. So I decided to go with a very old statement with a cash transfer amount---not 12/31/2011 value. It exceeds $200K and thus requires an exact figure instead of ticking a range.
As a general principle, if you can only estimate a value you should do that rather than not file the form at all.


So I said "what do you mean it's beyond your scope? You're the IRS. You wrote the tax law. You have to give me an answer." Then he softened and almost chuckled and said, "That's exactly what I told my supervisor when he told me that's what I had to say. What the hell are we getting paid for?" Then we had a nice chat and both agreed it will all shake out and get defined better after this first year. He told me to write down his name and ID and if I have any problems with the IRS to give his details.
Was it the IRS who wrote the law? - or Congress?


I'm sick of Form 8938 and will deal with it next year after the IRS gives more specific direction and TurboTax works out the bugs.
There may never be any more specific direction.
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Old Feb 21st 2012, 9:33 am
  #44  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by Steve_
That is a very interesting article, Canada at the moment though is giving the IRS the finger,
Not really. As far as I am aware, Canada does share with the IRS (and vice versa) details of income earned in Canadian institutions by residents of the United States. Same goes for the United Kingdom, Australia and most other Western nations.

The issue that Canada has is that its banks should not be put under pressure to report directly to the IRS when they already report to the CRA, which in turn shares with the IRS. The other issue the Canadians have is that its banks cannot reasonably be expected to identify US citizens among their clients, although realistically since such US citizens are generally paying Canadian taxes, the amount of US tax lost is approximately zero.
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Old Feb 21st 2012, 12:51 pm
  #45  
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Default Re: Warning: TurboTax, Foreign Assets & Form 8938

Originally Posted by JAJ
As a general principle, if you can only estimate a value you should do that rather than not file the form at all.
Even better.. the instructions for form 8938 direct one to enter a value of $0 for a pension when you don't know the value of your interest in it.

From the instructions;

Value of an interest in a foreign estate, foreign pension plan, and foreign deferred compensation plan.
....... 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, use a value of zero for the interest.

The point being, you should give the IRS the details of the plan (name & address of the institution etc.)
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