Non-Resident Indians Face High Exposure to the FBAR Reporting Requirements

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Non-Resident Indian (NRI) is an Indian citizen who has migrated to another country, a person of Indian origin who is born outside India, or a person of Indian origin who resides permanently outside India. A large number of the NRIs left India as a result of a job offer, for example as a software engineer or an IT consultant.

In spite of leaving their country, most NRIs maintain close ties with their homeland and their families. There is a trend among NRIs to purchase rural and semi-rural non-income producing land in India as a retirement investment. A minority of the NRIs also rent out their homes and apartments.

As a result of all of this personal and economic activity, the NRIs have a constant source of foreign income, which is usually deposited either in an NRO bank account. In order to purchase real property in India or help their families, NRIs often open and maintain NRE accounts as well.

Unfortunately, most of the NRIs residing in the United States are completely unaware that these NRO, NRE, and other bank and financial accounts must be reported on FBAR (the Report on Foreign Bank and Financial Accounts).

This problem is further exacerbated by the fact that a lot of NRIs think that paying taxes in India means that you do not need to report their Indian income in the United States. As a result of this misunderstanding, a lot of NRIs end up in a situation where they are in violation of both FBAR and income tax requirements.

This is an extremely dangerous combination which may result in the imposition of substantial FBAR penalties as well as additional income tax penalties. In the worse case scenarios, where the IRS finds that the violation is willful, a criminal prosecution may be initiated.

Contact Sherayzen Law Office NOW For FBAR Help

If you an NRI who has not disclosed his bank and financial accounts in India, contact Sherayzen Law Office as soon as possible. Eugene Sherayzen is an experienced voluntary disclosure attorney who will guide you through the complex and dangerous maze of U.S. tax compliance laws and regulations, and help you find the right solution to your FBAR problems.

One-Week Filing Extension to Taxpayers Whose Preparers Were Affected by Hurricane Irene

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On September 1, 2011, the Internal Revenue Service announced that it is granting taxpayers whose preparers were affected by Hurricane Irene until September 22, 2011 to file returns normally due September 15.  The taxpayer’s preparer must be located in an area that was under an evacuation order or a severe weather warning because of Hurricane Irene, even if the preparer is located outside of the federally declared disaster areas.

This relief, which primarily applies to corporations, partnerships and trusts that previously obtained a tax filing extension, is available to taxpayers regardless of their location.

It is important to note that this relief does not apply to any tax payment requirements.

OVDI Deadline Extended until September 9, 2011

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Due to the potential impact of Hurricane Irene, the IRS has extended the due date for offshore voluntary disclosure initiative requests until September 9, 2011. For those taxpayers who have not yet submitted their request and any documents, the following actions are necessary by September 9, 2011:

Identifying information must be submitted to the Criminal Investigation office. This includes name, address, date of birth, and social security number and as much of the other information requested in the Offshore Voluntary Disclosures Letter as possible. This information must be sent to:

Offshore Voluntary Disclosure Coordinator
600 Arch Street, Room 6404
Philadelphia, PA 19106

Send a request for a 90-day extension for submitting the complete voluntary disclosure package of information to the Austin campus. This request must be sent to:

Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative

Contact Sherayzen Law Office NOW to Discuss Your Legal Situation

If you are wondering about whether OVDI is the program for you and how to take advantage of it, contact Sherayzen Law Office as soon as possible to discuss your case. Our experienced voluntary disclosure tax firm will guide you through the complex maze of the U.S. tax compliance laws and regulations and help you find the solution that fits best your situation.

Underpayment and Overpayment Interest Rates for the Fourth Quarter of 2011

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On August 18, 2011, the Internal Revenue Service announced that interest rates will decrease for the calendar quarter beginning October 1, 2011. The rates will be:

  • three (3) percent for overpayments (two (2) percent in the case of a corporation);
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • zero and one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. These rates determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Rev. Rul. 2011-18. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. Pursuant to I.R.C. section 6621(c), the rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. See section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 8, 11, 13, and 17 of Rev. Proc. 95-17, 1995-1 C.B. 556, 562, 567, and 571. Interest factors for daily compound interest for an annual rate of 0.5 percent are published in Appendix A of Revenue Ruling 2010-31, 2010-52 IRB 898, 899. 3.

Contact Sherayzen Law Office

If you have any questions with respect to IRS interest rates and any other tax-related concerns, you should contact our experienced tax firm to discuss your case.

Post-OVDI Options: What to Do If You Cannot Make the OVDI Deadline

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Introduction:  OVDI Deadline is August 31, 2011

On February 8, 2011, the Internal Revenue Service initiated  2011 Offshore Voluntary Disclosure Initiative (OVDI), a special voluntary disclosure initiative, designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes.  While this program is not available (or even desirable) for everyone, the OVDI program offered many taxpayers a way to bring themselves back into compliance with U.S. tax laws.

The program is only available, however, for taxpayers who apply to be accepted into the program prior to August 31, 2011.  It is then possible to get an extension to file the documents, even though there is no guarantee that the extension will be granted, especially for late filers.

Voluntary Disclosure After OVDI

So, what can you do if you cannot make the OVDI deadline?  Is any type of voluntary disclosure precluded if you cannot apply for the OVDI by August 31?

The answer is no.  Other types of voluntary disclosure will be available after August 31, 2011.  It is important to emphasize, however, that the OVDI provides a degree of stability and certainty of FBAR penalties that are unlikely to be matched by other voluntary disclosure options.

Traditional IRS Voluntary Disclosure 

The chief post-OVDI voluntary disclosure program will be Traditional IRS Voluntary Disclosure.  While it will not offer the same certainty of the FBAR penalties as OVDI currently does with its tiered penalty structure, the Traditional Voluntary Disclosure will be particularly useful for taxpayers who potentially face criminal charges and willful penalties.

Doing Nothing Is Dangerous

It is important to emphasize that, whether or not you will be able to take advantage of the OVDI program, the most dangerous option for you is to do nothing. Taxpayers, who hide this offshore assets and do not come forward, are much likely to face far higher penalty scenarios as well as the possibility of criminal prosecution.

Contact Sherayzen Law Office NOW To Solve Your Tax Issues

Sherayzen Law Office can help you resolve all of your tax compliance issues.  Our experienced voluntary disclosure tax firm will guide you through the voluntary disclosure process and vigorously advocate your position, vying for the best outcome possible in your case.  E-mail or call us NOW!