form 8938

Hi

I have a pretty simple time filing as I don't have any savings, bonds etc. The only thing I have is a SIPP which I file with the FBAR form. I do own 5% of a family business. Does that have to be listed on Form 8938?

Hello

With regards to your message, if you have already met the FATCA filing threshold, then yes, any stock in a foreign company needs to be reported on the Form 8938. Also if you have signature authority over any of the accounts associated with the family business, those would be reportable on the FBAR.

Lastly, depending on how that family business is set up, you may have additional filing liabilities because of it... I would recommend speaking with an accountant to fully understand what (if any) reporting would be required.

I hope this helps!

Hi

No I haven't met the threshold (200K?) as I have no Isa's etc. I have no signatory authority over any of the family business accounts. The only account I have signatory authority is a Sipp pension which was worth about 20k dollars, which I report on Fbar.

So I'm guessing my 5% stake in the family business does not need reporting?

Thanks

If your overall foreign financial assets exceed the applicable filing threshold you are required to file Form 8938.

A SIPP is an account/ asset for an FBAR and Form 8938 - it is also likely to be reportable annually on Forms 3520-A and 3520. You may want to think if you qualify to elect to exclude income and gains within the SIPP by electing into the treaty on your return.

As far as the non-US sited family business is concerned you do not mention if a check the box election has been made; the value of the shareholding and if you have figured out if it is a PFIC potentially requiring mandatory annual Form 8621 filing.

So even though the SIPP (pension) is valued at 20k it has to be reported on form 8938? I thought the threshold was 200k? As for the value of the shareholding, how would that be determined? I have no idea what a check the box election is or what PFIC means?

Thanks for your feedback.

If you have not crossed the 200K threshold then you will not have to report on the Form 8938...however once you do cross that threshold the SIPP will be reportable.

The reporting for the SIPP is unfortunately a bit of a grey area, but Guya is right that it could be considered a foreign trust and require a Form 3520 to be filed.

Also, without knowing more details about the structure of that family business it is difficult to say whether a PFIC would be needed or not. I would strongly suggest speaking with an accountant, or a family member who is in a similar reporting situation, to see exactly what should be filed.

The contributions of tax professionals to this site are invaluable......but on a public forum they won't commit to whether a SIPP is a pension under the DTA or whether additional trust forms like 3520 are required. It is a grey area and I would choose the simplest filing option.

For myself I would elect into the DTA on an 8833 and claim tax deferral on contributions and gains in the SIPP under Articles 17 and 18. I would not file 3520s for the SIPP and would not worry about it.

The PFIC issues with the family business could be complex and professional help is probably required for that. But if it's a real business, one that makes and sells something PFIC probably won't be an issue because it applies mostly to investment funds and there are investment and asset thresholds.

http://en.wikipedia.org/wiki/Passive_foreign_investment_company

Any income you get from it must be reported. 

First of all, thanks for all your help.

Let me give you some more definite details.

The sipp is a pension which I report on my FBAR. I am not allowed to touch the money for at least ten years. As it stands I have lost money on it since inception.

The 5% stake in the family business is worth about 160k USD, based on the 2014 balance sheet. I receive no dividends or income from the 5% stake.

If the family business is foreign and your overall assets exceed the applicable filing threshold you are required to file Form 8938.

If the shareholding is a PFIC you are required to file Form 8621 each year from 2013 onwards. This would be mandatory in such circumstances. It is not a grey area.  Someone - possibly you, possibly the business accountant - needs to do some PFIC testing to figure out  if the shareholding is a PFIC and - if so from what date. I suggest that you take the time should read IRS instructions for their Form 8621 and also IRS Notice 88-22; which explains how the quarterly testing is required to be carried out.

I've always been curious, if the SIPP is a trust but not a 402(b) trust (essentially an employer-related trust) and the treaty is elected to allow deferral and avoid PFIC filings, what in the treaty says that no 3520/3520-A is required?

There's nothing in the treaty to eliminate foreign trust forms. All it says is that pensions under the meaning of certain UK legislation will receive US tax deferral on gains and contributions. You could analyze the structure and file lots and lots of forms, maybe 3520, 3520-A, 8621 as well if you like. But the sensible person will think of Occam and go for the simplest solution that gets the correct result. The IRS office at the London Embassy was always good at cutting through the complexities and just telling people to Keep It Simple Stupid. When I asked them directly about SIPPs (and in a couple of other reports that I've seen on here) the IRS Office has basically laughed at the need to file 3520s for SIPPs. It's hard for professionals to do that because they are putting themselves on the line and they have a responsibility to themselves and their clients to cleave to the law very tightly in places where the individual can use some common sense to make filing easier while still coming out with the same result.

There isn't a fine for not filing a foreign trust form and if you are electing the DTA whether you file one or not will not change the amount of your taxes so there's no fine there either. While some interpretations of the law will require you to file trust forms for a SIPP others don't and I can't imagine the IRS ever worrying about a missed 3250-A on a UK SIPP. But make sure you do file FBAR and 8938 when required.

Nun,

If you report one's SIPP on a FBAR and 8938, is it imperative to file 8833 assuming you don't file 3520 or 3520A ?   I guess it can't be assumed that a treaty is in place unless you put it into your tax return?

Nun,

If you report one's SIPP on a FBAR and 8938, is it imperative to file 8833 assuming you don't file 3520 or 3520A ?   I guess it can't be assumed that a treaty is in place unless you put it into your tax return?

Basically the answer is "yes". There are certain situations where an 8833 is not required, pension income is one of those situations, (see the link and scroll down to "Exceptions"), but I would always file one if I was relying on the DTA.

http://www.irs.gov/Individuals/International-Taxpayers/Claiming-Tax-Treaty-Benefits

FYI here is a good thread that describes the way the IRS office at the London US Embassy sees things....it's interesting to read.

http://talk.uk-yankee.com/index.php?topic=81730