8938: Not a Prelude to a Wealth Tax…This Time
The Nestmann Group, Ltd.
by Mark Nestmann: USA
to Non-Resident Citizens: 'Pay Up, or Face the Consequences'
In my last
blog entry, I described the latest salvo against offshore financial
privacy from the IRS: the requirement to file a tell-all form annually
with your tax return detailing foreign financial assets
with an aggregate value exceeding $50,000.
The IRS recently
issued a draft version of this Form 8938, along with preliminary
regulations on how to complete it. They regulations dont specify
what you dont need to report, but assuming they dont
change dramatically between now and the time theyre issued
in final form, the following types of assets appear to remain non-reportable:
real estate. If
you own real estate outside the United States in your own name,
I dont know of any requirement to disclose that ownership
on Form 8938 or on Treasury Form 90-22.1 (the FBAR
form). However, you must also report and pay tax on any income
from offshore property. And, if you own property through a foreign
entity, you must disclose the existence of that entity on Form
8938 and file a separate information or tax return for it annually.
life insurance or annuity policies. A foreign issuer of a
life insurance or annuity policy could be considered a counterparty
according to the definitions in the instructions for Form 8938.
However, the examples listed in the draft instructions say nothing
about foreign life insurance or annuity policies. But, you need
to report these policies on the FBAR, as you can read here.
metals investments. Its clear that if you hold precious
metals through a bank account, you must report the existence of
the account on both Form 8938 and the FBAR. But, if you hold precious
metals in a safety deposit box or private vault box to which you
have direct and exclusive access, they appear to be non-reportable.
Other storage arrangements may or may not be reportable on the
FBAR, but not on Form 8938, as precious metals dont appear
to be a specified foreign financial asset. The safest
recommendation is to report any type of offshore storage of precious
metals in which you dont have direct and exclusive access
on the FBAR.
much more to come in the continuing U.S. vendetta against all-things
offshore. An increasing number of offshore banks and service providers
wont even deal with U.S. clients anymore, a legacy of the
USA PATRIOT Act, over-zealous IRS investigations, and new regulations
that force many offshore brokers who deal with U.S. residents to
register with the Securities & Exchange Commission.
in 2014, money transferred from the United States to foreign financial
institutions and non-financial entities will be subject to a 30%
withholding tax. The only way to avoid the tax will be for the institution
or entity to enter into a one sided disclosure agreement with the
IRS. If entering into the agreement violates a foreign law, thats
too bad. The only alternative for the institution or entity is to
get rid of its U.S. clients. Thousands of offshore banks and service
providers are doing just that.
only one way out of this mess for U.S. citizens and permanent residents.
Thats to legally and permanently end your future U.S. tax
and reporting obligations via a legal process called expatriation.
This process requires that you give up your U.S. citizenship and
passport if youre a citizen, or your green card if youre
a permanent resident. Its a big step, and one you shouldnt
take lightly. Expatriation may also trigger a big tax bill, and
it doesnt affect past tax and reporting obligations. Whats
more, if you have U.S. property or income, you may still need to
deal with the IRS even after you expatriate.
For more information
on expatriation, consult the latest edition of my special report,
The Billionaire’s Loophole, available here.
with permission from The
Nestmann Group, Ltd.
Nestmann [send him mail]
is a journalist with more than 20 years of investigative experience
and is a charter member of The
Sovereign Society’s Council of Experts. He has authored over
a dozen books and many additional reports on wealth preservation,
privacy and offshore investing. Mark serves as president of his
own international consulting firm, The
Nestmann Group, Ltd. The Nestmann Group provides international
wealth preservation services for high-net worth individuals. Mark
is an Associate Member of the American Bar Association (member of
subcommittee on Foreign Activities of U.S. Taxpayers, Committee
on Taxation) and member of the Society of Professional Journalists.
In 2005, he was awarded a Masters of Laws (LL.M) degree in international
tax law at the Vienna (Austria) University of Economics and Business
© 2011 Mark
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