Is a Malta Pension Plan Reported on Form 8938, IRS Amnesty

Is a Malta Pension Plan Reported on Form 8938, IRS Amnesty

Is a Malta Pension Plan Reported on Form 8938

One common question we receive often is whether a Malta Pension Plan is reported on Form 8938. This has become a bigger issue in recent years since the Malta Retirement Scheme (aka Malta Pension Plan or ‘MRS’)  has become a key enforcement priority for the IRS and DOJ. That is because the U.S. government believes that many Taxpayers only opened their Malta Pension Plan in an attempt to circumvent the Roth IRA contribution limitations and move hundreds of millions of dollars into the retirement schemes, with the ultimate goal of avoiding taxes. The IRS and DOJ are working together to crack down on these types of trusts, and are pursuing both criminal and civil investigations against U.S. taxpayers. Generally, retirement plans are reported on Form 8938. But, depending on how the foreign retirement/trust is treated, it may not require duplication on Form 8938 if Form 3520 and/or Form 8621 is required — but it also depends on how this retirement scheme is comprised.

Form 8938 and Foreign Pension

In general, foreign pension plans are required to be reported on Form 8938.

As provided by the form 8938 instructions:

• • • Interests in Foreign Pension Plans and Foreign Deferred Compensation Plans Report in Part VI your interest in the foreign pension plan or foreign deferred compensation plan. Do not separately report the assets held by the plan.

  • • Valuing Interests in Foreign Estates, Foreign Pension Plans, and Foreign Deferred Compensation Plans If you have an interest in a foreign estate, foreign pension plan, or foreign deferred compensation plan, the maximum value of your interest is the fair market value of your beneficial interest in the assets of the estate, pension plan, or deferred compensation plan as of the last day of the tax year.

  • • If you do not know or have reason to know based on readily accessible information the fair market value as of the last day of the tax year, the maximum value is the fair market value, determined as of the last day of the tax year, of the cash and other property distributed during the tax year to you as a beneficiary or participant. 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 as of the last day of the tax year, use a value of zero as the maximum value of the asset.

Foreign Retirement Exceptions

Participants in and Beneficiaries of Tax-Qualified Retirement Plans. A participant in or beneficiary of a retirement plan described in Internal Revenue Code section 401(a), 403(a), or 403(b) is not required to report a foreign financial account held by or on behalf of the retirement plan.

Foreign Grantor Trusts

Since the Malta Retirement Scheme is not an employment pension (all contributions are made by the investor and not deferrals from the employer), the IRS may take the position it is a foreign trust, and therefore, the taxpayer has to file the Form 3520/3520-A instead of Form 8938.

• • • If you are considered the owner under the grantor trust rules (sections 671 through 679) of any part of a foreign trust, you do not have to report any of the specified foreign financial assets held by the part of the trust you are considered to own if you satisfy the following conditions.

      • You report the trust on a Form 3520 that you timely file with the IRS for the same tax year. See Part III of Form 3520 and its instructions.

      • You ensure that the trust timely files Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner, (or you timely file a substitute Form 3520-A) with the IRS for the same tax year. See Form 3520-A and its instructions. •

      • You report the filing of Form 3520 and 3520-A on Form 8938. Instead, you must identify on Form 8938 how many of these forms you file.

Malta Pension Fines and Penalties

The penalties for not reporting Form 8938, 3520, and 3520-A for foreign trusts can be harsh so Taxpayers will want to stay compliant and/or get into compliance if they are not already in compliance for prior years.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms such as Form 8938, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.