NEW YORK, NY, April 16, 2012 – The New York State Society of Certified Public Accountants (NYSSCPA) is asking the IRS to clarify several temporary rules related to the reporting of foreign financial assets that are slated to be permanently implemented.

 

In a comment letter issued to the IRS on March 19, the NYSSCPA outlined several areas of Internal Revenue Bulletin: 2012-8 that should be revised prior to permanent implementation, including more clarifying examples to define regulations and a more reasonable penalty structure. These rules are already in effect as temporary regulations.

 

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 the taxpayers annual income tax return. The amendments also include a proposed regulation setting forth 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.

 

“One thing the regulations are really missing is examples” that show what is considered a foreign asset and how it should be reported, said NYSSCPA International Taxation Committee Chair Melissa Gillespie of situational models the regulations can use to show what is considered a foreign asset and how it should be reported. “They really assist the taxpayers and practitioners to define the meaning of the regulations.”

 

Gillespie said additional guidance is also very much needed to outline what is considered to be a specified foreign financial asset and how are they to be valued and reported.

 

The NYSSCPA also takes issue with the proposed regulations penalty structure that can unfairly punish taxpayers whose foreign assets are near the threshold for filing.

 

“If you make a mistake in the valuation you can be hit with a $10,000 penalty,” Gillespie said of foreign assets that may have originally been valued at just below threshold limit for filing and later are determined to be valued at slightly over the threshold. “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, and consideration 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.

 

 

Representing more than 28,000 CPAs, the NYSSCPA was the first state accounting organization in the nation. Incorporated in 1897, the Society is a not-for-profit organization that seeks to establish and maintain high standards of integrity, honor, and character among certified public accountants.

The New York State Society of CPAs is located at 3 Park Avenue in New York City. To learn more about the Society, call 800-633-6320 or visit the Society’s website at www.nysscpa.org.