USA IRS - ONLY 5% PENALTY FOR OVERSEAS UNDECLARED INCOME & ASSETS

Dear Friends,

Good wishes.

The Internal Revenue Service (IRS) had taken the initiatives for declaration of overseas undisclosed  income and financial assets of US tax residents  by introducing Offshore-Voluntary Disclosure Initiatives (OVDI) in the year 2009 and 2011 and Offshore Voluntary Disclosure Programme(OVDP) in the year 2012. Under OVDI & OVDP scheme,  tax-payers were required to pay tax on hitherto undisclosed income of earlier eight  tax years together with interest thereon and in addition a penalty of 25% / 27.5% resp. of the highest balance of undisclosed foreign bank accounts and other foreign assets of previous 8 years.

And to capture the information of US tax residents who have not declared their overseas income and assets  USA signed Intergovernmental Agreements with 112 countries including India under Foreign Account Tax Compliance Act (FATCA). In view of this advice 884 Indian Financial Institutions ; Family Trusts and Companies / Entities which includes Indian Banks ; Mutual Funds ; Insurance Companies ; Brokerage Houses ; Family Trusts & Private Companies have applied for Global Intermediary Identification Number (GIIN). Detailed list is posted on our website at femaonline.com
http://www.femaonline.com/FATCA/FIIList-India/. And 0n the 9th July 2015 India has finally signed the IGA (Inter Governmental Agreement) with USA whereupon all these entities have started reporting  accounts showing the account holder as US citizen or USA address or USA phone number or USA Person or Power of Attorney holder provided balance in such account exceeds US$ 50,000 or Insurance value exceeds US$ 250,000 as on 30th June 2014.

NOW , it is necessary for every US citizen or Green Card Holder to address the issue very seriously if the Indian Income of earlier years has not been declared in Form 1040 or if Indian Financial Assets exceed US$ 10000 and FBAR have not been filed earlier.
However appreciating the possibilities of ignorance and negligence of tax payers a very liberal declaration scheme requiring payment of penalty of 5% of highest value of overseas financial assets over previous six year end was introduced on 18th June 2014 by way of  Streamlined Filing Compliance Procedure (SFCP) - one each for  for US taxpayers residing in the United States  as "Streamlined Domestic Offshore Procedures" ( SDOP )and  for US taxpayers residing outside the US  as "Streamlined Foreign Offshore Procedures" (SFOP ). Brief details and links of IRS websites are


1.  Common conditions for eligiblity of  Streamlined Filing Compliance Procedure:
   .01    Only individual tax payers are eligible.
   .02  The tax payer is to certify that non filing is on account of non willful conduct that includes negligence, inadvertence or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
   .03    The IRS should not have initiated either civil or criminal investigation.
   .04   Tax payers should have a valid Tax Payer Identification Number (TIN). Individual not having TIN can submit ITIN applications


2.    ELIGIBILITY for SDOP :
  .01    Individual must be US Resident i.e. a US citizen or Green Card Holder who has resided in USA and  has not been physically outside US for more than  330 days in most recent three years.
  .02    Should have filed US Tax returns of last 3 years within due date or within extended time applied.
  .03    Failed to disclose foreign income and pay tax under IRS and/or  failed to file an FBAR - Form TD-F90-22.1 (Report of Foreign Bank And Financial Accounts)  with respect to foreign financial assets.


3.    REDUCTION OF PENALTY :
  .01   The original penalty of 27.5% was payable on maximum aggregate overseas balance during the last 8 years which is substantially reduced to 5% of maximum aggregate value of Overseas Financial Assets as at the year end of last 6 years.

4.    PROCEDURES :

  .01   Tax payer must file amended US Tax Returns together with all required information for previous 3 years i.e. 2012 , 2013 & 2014.
  .02   One should also file Form 8938 for last 3 years ; Form 3520 for inheritance or gifts received ; Form 5471 if 10 % or more shares are held in Indian Company ; Form 8865 if there is 10% or more interest in partnership firm   ; Form 8621 if Indian Mutual Funds are held and other specified  Forms for previous 3 years for which due date has passed.   
  .03   One should file delinquent FBAR (New Form FinCEN 114) of last 6 years i.e.2009 , 2010, 2011,  2012 , 2013 & 2014.
  .04   One is required to pay tax, interest and 5% offshore penalty on aggregated highest balance of all foreign financial assets as at end of last 6 years.
  .05   AND file Non wilfull declarations.   

5.   Details for Residents of USA are at  :
http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States

6.   Where as details for US Tax Residents residing abroad can be found at : http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States.

The entities who have commenced reporting include all Private and Public Sector Banks like State bank of India , Bank of India , Bank of Baroda , ICICI Bank , HDFC Bank , Corporation Bank , Oriental Bank of Commerce , etc. ; almost all Indian Mutual Funds like ICICI Prudential Mutual Fund , Birla Sunlife Mutual Fund , L&T Mutual Fund , HDFC Mutual Fund , Reliance Mutual Fund , Religare Invesco Mutual Fund etc. ; almost all Insurance Companies like ICICI Prudential Life Insurance Company , Birla Sunlife Insurance Company , and Brokerage Houses like Motilal Oswal Securities Ltd , Edelweiss Securities Ltd , Goldman Sachs India Securities Ltd , Morgan Stanley Securities Ltd. etc..


with regards ,
sincerely ,

RAJESH H DHRUVA
Chief Executive
femaonline.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
Cell : 0091 98240 49944
email 
rajesh@femaonline.com ; keynote@nribanks.com
 

   

INDIAN BANKS to PROVIDE INFO of NRI A/Cs. to IRS

INDIAN BANKs : MFs ; INSURANCE COs. & BROKERAGEs registered under FATCA of USA

  

alttag