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) requiring overseas including Indian Banks, Mutual Fund Houses, Insurance Companies and Brokerage Houses to report accounts showing US citizenship , US address , US POA , or US phone numbers if the balance in such account exceeded US$ 50,000 on 30th June 2014.
 
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 eligibility 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 TIN 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 last 3 years.
.02  One should file delinquent FBAR (New Form FinCEN 114) of last 6 years for which due date has passed.
.03  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.    
.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. AND
.05  Filing of Non wilful declarations.   
 

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

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 
[email protected] ;

[email protected]
 

 
   

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

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

  

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