2011 US TAX UPDATE:

Important tax changes that will affect overseas taxpayers:

1) Foreign Financial Assets Reporting – Form 8938 to be released by the IRS
For 2011, taxpayers with specified foreign financial assets will have to file a disclosure statement with their income tax return if the value of all such assets is greater than $50,000.

This disclosure is in addition to the Report of Foreign Bank and Financial Accounts (FBAR), which is filed with the Treasury Department separately by June 30 each year.

A “specified foreign financial asset” is:

1. any depository or custodial accounts maintained by a foreign financial institution:
2. any stocks or securities issued by foreign persons;
3. any other financial instrument or contract held for investment that is issued by or has a counterparty who is not a U.S. person;
4. any interest in a foreign entity.

The minimum penalty for failing to submit the required disclosure with the income tax return is $10,000 per tax year. The penalty increases by $10,000 for each 30-day period following notification from the Treasury Department, with a maximum penalty of $50,000.

There also exists a new accuracy related penalty of forty percent on underpayment of tax attributable to a taxpayer’s failure to disclose interest in foreign bank accounts. (Sec. 6662(j)).

New form 8938 to be released by the IRS. Here is a link to the draft Form 8938.

2) Foreign Earned Income Exclusion and Foreign Housing Exclusion:

• Maximum Foreign Earned Income Exclusion (FEIE) has been increased
  from $91,500 to $92,900.
• Foreign Housing expense-base amount has also been increased from $14,640 to $14,864..
• 2011 maximum foreign housing expenses can be claimed for living in most cities in China has been increased from $27,450 to $27,870.
• 2011 limits on foreign housing expenses for living in high-cost localities, Shanghai, Hong Kong and Beijing remain the same as 2010 and set as following:
  

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