IRS Announces New Initiative To Target Unreported Indian Accounts In Northern California
Late last year at a California Bar conference, an IRS official stated that the IRS will start in 2014 a new Indian initiative targeted at individuals with undeclared Indian accounts.
Nicholas Connors, a supervisory revenue agent with the IRS small business/self employed division stated that the IRS will soon “begin examining US taxpayers suspected of holding undeclared accounts in Indian banks”.
The United States is the only country that requires citizens and residents (i.e. green card holders) to report their worldwide income, no matter where in the world they might live or how many other citizenships they might hold. Also, U.S. citizens and residents are required to file an FBAR with the U.S. Treasury disclosing any foreign financial account over $10,000 in which they have a financial interest, or over which they have signature or other authority. A willful failure to report a foreign account can result in an annual penalty of up to 50 percent of the amount in the account.
Connors stated that the IRS has received the first round of information on accounts from Indian banks. From this batch, there are at least 100 Indian bank account cases that the IRS is sending out for examination (also known as audit) across the country. “I think California, because of the large Indian population, is going to get more than its fair share of cases,” Connors said.
“Within the Northern California/Bay Area, the IRS Northern California/Bay Area office is scheduled to pick up 30 or 40 of those.” Connors further added that “Looking ahead, the offshore bank investigations are just going to grow” and “within the IRS audit division, there’s talk that this could someday become a work issue for every single revenue agent in the IRS where everyone will be working some type of offshore case.”
While much recent publicity has affirmed that the IRS has been targeting Swiss and Israeli banks, India also continues to be a focal point for the United States government. As a result, over the past 5 years, more than a dozen NRI’s have pled or have been found guilty of failure to report foreign income and accounts in U.S. criminal courts. Most recently, Ashvin Desai of San Jose, California was convicted in October 2013 of tax evasion. According to evidence presented at trial, Desai and his family maintained bank accounts worth more than $7 million with The Hong Kong and Shanghai Banking Corporation Ltd. (HSBC) in India. Desai prepared and filed income tax returns for his family members that failed to report the accounts or over $1.1 million in interest generated by them over three years.
Congress has also enacted the Foreign Account Tax Compliance Act, requiring foreign banks to disclose U.S. customer accounts every year or pay a 30% tax on their U.S. investment income.
If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.
Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in San Francisco, Los Angeles and elsewhere in California qualify you for OVDI.
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