Overwhelming opposition to IRS proposed rule for optional reporting of Donor’s Tax Identification details by the Donee organizations

Overwhelming opposition to IRS proposed rule for optional reporting of Donor’s Tax Identification details by the Donee organizations

December 16th is the deadline for Treasury Department and IRS to hear comments on all aspects of the proposed rules concerning the time and manner for donee organizations to file newly proposed information returns that would report the required information about contributions (donee reporting). This filing would provide an exception to the “contemporaneous written acknowledgement” requirement for substantiating charitable contribution deductions, whereby a taxpayer who claims a charitable deduction for any contribution of $250 or more is required to obtain substantiation in the form of a contemporaneous written acknowledgment (CWA) from the donee organization.

The proposed regulations require that, in order for a donor to be relieved of the current CWA requirement, a donee organization that uses donee reporting must file a return with the IRS reporting certain information and must furnish a copy of the return to the donor whose contribution is reported on such return. These regulations provide the content of the return under section 170(f)(8)(D), the time for filing the return, and the requirement to furnish a copy to the donor. Moreover, any burden associated with the collection of information under the proposed regulations is minimized by the fact that donee reporting under the proposed regulations is optional on the part of any donee, including small entities. However, the proposed rule is optional and the donees need not use this donee reporting process and donors can continue to use the current CWA process.

Text of Federal Register announcement for proposed rule

Most of the charities feel that the proposal is a bad idea and have overwhelmingly expressed their voice against the proposed rule.

Comments to the proposed regulations

The National Council of Nonprofits opposes the proposed Donee Reporting Rule and encourages donors and nonprofits to submit comments to the federal government explaining the real-world consequences of the rule, if promulgated as written.

According to a note published by the:

1. “Never” is the better answer. A charitable nonprofit should never be asking a donor for her or his Social Security number when soliciting donations; if someone is asking in relation to a donation, that should be considered a sign of a scam or fraudulent solicitation.

2. The proposed Donee Reporting Rule conflicts with the IRS’ advice to taxpayers. The Internal Revenue Service advises taxpayers on its website and on a YouTube video to only give out their Social Security numbers when “absolutely necessary.” Yet the IRS proposed voluntary system essentially requires nonprofits to do just that: ask donors to give out their SSNs when it is not absolutely necessary. Voluntary and “absolutely necessary” are polar opposite  instructions that undermine taxpayer protections and public confidence – public confidence in both the IRS and innocent charitable nonprofits.

3. Requests for Social Security numbers could result in reduced charitable contributions. Numerous individuals commenting on the proposed rule have raised the concern that donors will be unwilling to contribute more than $250 to a charitable nonprofit if it asks for Social Security numbers.

4. Concerns about identity theft are very real. Just this year, hackers have accessed sensitive employee data at the federal Office of Personnel Management and the Central Intelligence Agency, two sophisticated entities with the resources and commitment to fighting intelligence breaches. And yet, hackers could not be thwarted. It is irresponsible for Treasury and the IRS to propose a system that calls on nonprofits to collect, store, and protect SSNs when identity theft is a growing challenge that even the federal government is not yet able to overcome.

5. The current contemporaneous written acknowledgement system is working. The proposed regulations make several admissions that raise the question: why are Treasury and the IRS bothering to create a new, optional, parallel reporting regime that will require more administrative burdens on both nonprofits and government personnel? The background description of the status quo states that the present contemporaneous written acknowledgement (CWA) “system works effectively, with minimal burden on donors and donees, and the Treasury and the IRS have received few requests … to implement a donee reporting system.” Treasury and the IRS even repeat their key admission: “Given the effectiveness and minimal burden of the CWA process, it is expected that donee reporting will be used in an extremely low percentage of cases.” Since there is not an overriding need for an alternative system, the flawed proposal to adopt a confusing and potentially dangerous Donee Report Rule should be rejected.

6. Just because the proposal is voluntary now is no reason to ignore its potential adverse impacts. Some might say they are not concerned about the proposed Donee Report Rule because it is purely voluntary at this time.

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Due Dates For Filing FBAR, Corporation And Partnership Returns Changed From 2016

Due Dates For Filing FBAR, Corporation And Partnership Returns Changed From 2016

The filling due dates for certain filings to be done in 2017 onwards for tax years beginning after December 31, 2015 have been changed. Strangely the changes have come from in an unexpected way with the President signing H.R.3236 – Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 on July 31, 2015 – into law.

FBAR FORM 114 – The due date of FBAR – FinCEN Report Form 114 (Report of Foreign Bank and Financial Accounts) shall be April 15, to coincide with the due date for filing 1040 Individual Income Tax returns. For the first time, taxpayers would also be able to file for an extension – for period up to 6-month till October 15.  As a relief for first time innocent omission to file, in the case of any taxpayer required to file such Form for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary.

PARTNERSHIP RETURNS (Form 1065) – The due date for Partnerships would be March 15 instead of April 15 as in the case of S Corporations, with a six months extension till September 15th. However, for Partnership filers who prepare returns on the basis of a fiscal year basis will be required to be file on or before the 15th day of the third month (instead of fourth month) following the close of the fiscal year, with an option six month extension.

C CORPORATION RETURNS (Form 1120) – The due date for C Corporations is also being changed to April 15 instead of March 15, with a 5 months extension till September 15. However, filers who prepare returns on the basis of a fiscal year basis will be required to be file on or before the 15th day of the fourth month (instead of third month) following the close of the fiscal year, with an option for five month extension until 2026. However, corporations which have a June 30 year end would get a seven-month extension until 2026.

OTHER RETURNS – The extension periods for filing Forms 1041, 5500, 990, 4720, 5227, 6069, 8870, 3520-A, 3520 have also been revised.

Other Significant Changes

Additional information on Form 1098 relating to mortgage interest

Mortgage information statements that are required to be sent to individuals who pay more than $600 in mortgage interest in a year will now be required to include the outstanding principal on the mortgage at the beginning of the calendar year, date of origination of the mortgage and the address of the property that secures the mortgage. These changes apply to returns and statements due after Dec. 31, 2016.

Inherited assets – Consistency in basis reporting between estate and beneficiaries

H.R.3236 also provides that anyone inheriting property from a decedent cannot treat the property as having a higher basis than the basis reported by the estate for estate tax purposes. It also creates a new Sec. 6035, which requires executors of estates that are required to file an estate tax return to furnish information returns to the IRS as well as the beneficiaries statements which will identify the value of each interest in property acquired from the estate as reported on the estate tax return. These amendments shall apply to property with respect to which an estate tax return is filed after the date of the enactment of this Act.

Here is the link to the H.R. 3236 –

https://www.congress.gov/bill/114th-congress/house-bill/3236/text#toc-HCFC1B5C758A944DE807AC0FC688A702A

30 JUNE 2015 IS DEADLINE FOR FILING OF 2014 BENCHMARK SURVEY OF U.S. DIRECT INVESTMENT ABROAD

30 JUNE 2015 IS DEADLINE FOR FILING OF 2014 BENCHMARK SURVEY OF U.S. DIRECT INVESTMENT ABROAD

(This is a mandatory compliance from U.S. Department of Commerce, Bureau of Economic Analysis (BEA) and NOT a tax compliance)

The Benchmark Survey of U.S. Direct Investment Abroad is conducted by U.S. Department of Commerce, Bureau of Economic Analysis to secure current economic data on the operation of U.S. Parent companies and their foreign affiliates. This is a mandatory survey conducted every 5 years.  For certain large companies there is annual filing requirement.

REPORTING REQUIREMENTS

If U.S. person had a foreign affiliate, that is, that had direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise, at any time during the U.S. person’s 2014 fiscal year, they need to file BE-10 report. For this purpose, US person includes any individual, branch, partnership, associated group, association, estate, trust, corporation, or other government or nongovernment organization.

There are different complex forms (BE 10A/ BE10B/ BE10C/ BE1D) which need to be filed by different US persons as may be applicable for them based on different criteria to be evaluated separately for each such U. S. Person.

DUE DATE

For 2014, a fully completed BE-10A forms along with the applicable form(s) is due no later than June 30, 2015 (extended due date for many filers)

EXTENSION

Extension request must be filed by the due date. 

PENALTIES

Whoever fails to report shall be subject to a civil penalty of not less than $2,500 and not more than $25,000.  Whoever willfully fails to report shall be fined upto $10,000.  Any officer, director, employee or agent of any corporation who knowingly participates in such violations, upon conviction, may be punished by fine, imprisonment or both. 

Please let us know if any of this applies to you/ your business and you want us to assist in the filing of above mandatory compliance.  As the due date of 30 June 2015 has now fast approaching, please contact us at the earliest.  Again, please be aware that it is a mandatory compliance.

We look forward to hearing from you soon. As always, contact us if you have any questions.

Last Minute reminder – Deadline for FBAR filing for 2014 is June 30, 2015

FOREIGN BANK & FINANCIAL ACCOUNT REPORTING (FBAR) Form 114  may be required to be filed if you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account.

Form 114 replaces TD F 90-22.1, the FBAR form used in the past. It is due to the Treasury Department by Tuesday, June 30, must be filed electronically. This due date cannot be extended and tax extensions do not extend the FBAR filing due date.

The requirement as per FBAR instructions and guidelines is that if at any time during the year, the aggregate of balances in overseas accounts was more $10000, then reporting has to be done by filing this form. This filing is independent of the Filing of Federal and/ or State Income Tax returns. You may be required to provide information even when you have signature or other authority but no Financial interest in the account.
There is no extension for FBAR form.

Important Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938) w.e.f. from 2011 onwards

In addition to the FBAR filing, Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. This Form is part of the Tax return and accordingly must be filed by the due date of Individual tax return in Form 1040.

If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), you may be subject to a penalty of $10,000.

OFFSHORE VOLUNTARY DISCLOSURE PROGRAM 2012 (OVDP) AND NEW STREAMLINED OFFSHORE PROCEDURES

The IRS is also currently offering people with undisclosed income from offshore accounts an opportunity to participate in Offshore Voluntary Disclosure Program 2012 (OVDP) in order to get current on their FBAR filings and tax returns.

For the program 2012, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure.

Taxpayers participating in the new initiative must file all original and amended tax returns and include payment for taxes, interest and accuracy-related penalties.

However, new Streamlined Procedure introduced from July 2014, is a relief for the person who wants to disclose offshore income and foreign assets not disclosed earlier.  The penalty is reduced to 5% of the highest aggregate yearend balance of assets of the years falling in the procedure for the U.S. individual taxpayers residing in the United States and 0% for U.S. individual taxpayers residing outside the United Statessubject to fulfilling of some other conditions.

If you would like us to file the FBAR for 2014 or for any of the earlier years, for you please provide us with the following detail for each of your overseas account:
– Name and address of the Bank or financial institution
– Account number and type of account
– Maximum balance at any time in the last calendar year and year end balances
– Whether account held Jointly with another individual

When you have signature or other authority but no Financial interest in the account, you have to provide the above information and in addition provide the following details:

– Name and address of the primary Account holder

– Taxpayer ID of the account holder, if any

– If account holder is an organization, filer’s relationship/ Title with the organization.

If you would like to avail of the benefit of Amnesty under 2012 Offshore Voluntary Disclosure Program (OVDP) or Streamlined Offshore Procedures and would like our assistance for the purpose, please call us to make an appointment. We would be happy to assist you in these matters. We would be billing separately for these services.

IMPORTANT H1B ALERT : NEW WORK LOCATION REQUIRES AN AMENDED H1B PETITION

May 21, 2015 – USCIS guidance announcement 

USCIS has today announced that whenever there is a new location for an employee outside the Metropolitan Statistical Area (MSA), merely filing a new LCA is not enough – An amended H1B petition has also to be filed. An employer must file an amended H-1B petition if their H-1B employee changed, or is going to change, his or her place of employment to a worksite location outside of the metropolitan statistical area (MSA) or an “area of intended employment”, even if a new LCA is already certified and posted at the new location. Once the employer files the amended petition, the H-1B employee can immediately begin to work at the new location without waiting for a final decision on the amended petition for that  H-1B employee to start work at the new location. This is based on a recent decision of USCIS Administrative Appeal Office (AAO) who has issued a precedent decision in the Matter of Simeio Solutions, LLC.

What happens to existing cases before the announcement on May 21, 2015 – Employers must file amended petition before August 19, 2015?

USCIS has also announced that if any of the H-1B employees were changing worksite locations at the time of the Simeio Solutions decision, the employers have 90 days from the date of this announcement (May 21, 2015) to file amended petitions for H-1B employees who changed their place of employment to an MSA or area of intended employment requiring coverage by a new or different LCA than that submitted with the original H-1B petition. Therefore, if an employer has not filed an amended petition for an H-1B worker who moved worksite locations before May 21, 2015, they have until August 19, 2015 to file an amended petition. Also, if any of the H-1B workers changed their worksite location before the Simeio Solutions decision, USCIS will not take adverse action against the employer or the employee if the employer, in good faith, relied on prior non-binding agency correspondence and did not file an amended petition due to a change in an MSA or area of intended employment by May 21, 2015. However, the employer must now file an amended petition for these H-1B employees by August 19, 2015. If the employer does not file an amended petition for these employees by August 19, 2015, they will be out of compliance with USCIS regulation and policy and thus subject to adverse action.  Similarly, the H-1B employees would not be maintaining their nonimmigrant status and would also be subject to adverse action.

If somehow, the amended H-1B petition is denied, but the original petition is still valid the H-1B employee may return to the worksite covered by the original petition as long as the H-1B employee is able to maintain valid nonimmigrant status at the original worksite. Moreover, if the previously-filed amended H-1B petition is still pending, the employer may still file another amended petition to allow your H-1B employee to change worksite locations immediately upon employer’s latest filing.

This would not apply if the new work location is within the same metropolitan statistical area (MSA) or an “area of intended employment” covered by the existing approved H-1B petition. If the H-1B employee is moving to a new job location within the same MSA or area of intended employment a new LCA is not required. Therefore, the employer does not need to file an amended H-1B petition. However, the employer must still post the original LCA in the new work location within the same MSA or area of intended employment.

Short term placement : Under certain circumstances, an employer may place an H-1B employee at a new job location for up to 30 days, and in some cases 60 days (where the employee is still based at the original location), without obtaining a new LCA.

Non-worksite locations: Also, if H-1B employee is only going to a non-worksite location, the employer does not need to file an amended H-1B petition. A location is considered to be “non-worksite” if the H-1B employees are going to a location to participate in employee developmental activity, such as management conferences and staff seminars, where the H-1B employees spend little time at any one location; or the job is “peripatetic in nature,” such as situations where their primary job is at one location but they occasionally travel for short periods to other locations “on a casual, short-term basis, which can be recurring but not excessive (i.e., not exceeding five consecutive workdays for any one visit by a peripatetic worker, or 10 consecutive workdays for any one visit by a worker who spends most work time at one location and travels occasionally to other locations).”

 

Here is the link to USCIS announcement : http://www.uscis.gov/news/alerts/uscis-guidance-when-file-amended-h-1b-petition-after-simeio-solutions-decision

THE BIG NEWS – USCIS allows certain H4 dependent spouses to work from May 26, 2015

U.S. Citizenship and Immigration Services (USCIS) has announced that effective May 26, 2015, they will allow certain H-4 dependent spouses of H-1B nonimmigrants to obtain EAD – Employment authorization. This announcement comes as part of President’s recent Executive action on immigration reform.

Eligible H-4 dependent spouses will be those, whose spouses are H-1B nonimmigrants and are the principal beneficiaries of an approved Form I-140, Immigrant Petition for Alien Worker; or have been granted H-1B status under sections 106(a) and (b) of the American Competitiveness in the Twenty-first Century Act of 2000. The Act permits H-1B nonimmigrants seeking lawful permanent residence to work and remain in the United States beyond the six-year limit on their H-1B status.

Eligible H-4 dependent spouses must file Form I-765, Application for Employment Authorization, with supporting evidence and the required $380 fee in order to obtain employment authorization and receive a Form I-766, Employment Authorization Document (EAD).

USCIS will begin accepting applications on May 26, 2015. Once USCIS approves the Form I-765 and the H-4 dependent spouse receives an EAD, he or she may begin working in the United States.

 For USCIS announcement click below

http://www.uscis.gov/news/dhs-extends-eligibility-employment-authorization-certain-h-4-dependent-spouses-h-1b-nonimmigrants-seeking-employment-based-lawful-permanent-residence

About us:     SmoothImmigration.COM
SmoothImmigration, which is part of Bhatia & Co, specializes in addressing the many complexities in Immigration process, to help businesses and individual navigate through the various stages of processes. Bhatia & Co is a diversified Full service Immigration, financial and business services firm concentrating on providing services to domestic and international organizations.
  
Our Team of highly skilled and diversified range of professionals provide service in all areas of Immigration,

We also render full range of services in areas of tax planning and tax preparation, audit and assurance, compliance, corporate service, accounting, outsourcing, business consulting, financial and retirement planning and litigation support service to a diverse range of businesses and individuals. 
  
Our US entity, Bhatia & Co, Inc incorporated in California in 2000 is headquatered in the heart of Silicon Valley, and has professional offices located in several locations in US, India with an associate office in Canada.

We are immigration consultants bonded with the California secretary of state

US OFFICE 

Santa Clara, California:
SMOOTHIMMIGRATION
(Business & Immigration Consultants)

5201 Great America Parkway, Suite 256, , Santa Clara, CA 95054
(408) 845 9411 (Phone)
(408) 351 0700 (Fax)
immigration@bhatiaco.com
http://www.smoothimmigration.com (Website)

Pleasanton, California : (New office)

5776, Stoneridge Mall Road, Ste 285
Pleasanton, CA-94588

925-260-1245 (Phone)

BHATIA & CO,INC (CPAs)

www.bhatiaco.com

For 2015, IRS announces Inflation adjusted limits for various tax benefits, deductions, adjustments, exemptions, etc

For tax year 2015, the Internal Revenue Service has announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments.

The tax items for tax year 2015 of greatest interest to most taxpayers include the following dollar amounts –

  • The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.
  • The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
  • The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
  • The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
  • Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014.
  • For 2015, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.
  • For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.
  • The annual exclusion for gifts remains at $14,000 for 2015.
  • The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 dollars from the amount for 2014.
  • Under the small business health care tax credit,  the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014.

Please let us know if you have any questions or need to do Tax planning for the coming year.

Regards,
Neeraj Bhatia

RBI announces that Govt of India has signed IGA under US FATCA

Reserve Bank of India (RBI) has announced that Government of India India and US have reached an agreement in substance on the terms of an Inter-Governmental Agreement (IGA) to implement US-FATCA and India is now treated as having an IGA in effect from April 11, 2014. However, IGA would be signed only after the approval of Cabinet.

Indian Financial Institutions would have time upto December 31, 2014 to register with US authorities and obtain a Global Intermediary Identification Number (GIIN).

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts. FATCA focuses on reporting by U.S. taxpayers about certain foreign financial accounts and offshore assets, as well as by foreign financial institutions (FFIs) about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest.  

Unless exempt, FFIs that do not both register and agree to report face a 30% withholding tax on certain U.S.-source payments made to them. Under FATCA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners. FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA.

http://rbidocs.rbi.org.in/rdocs/notification/PDFs/FA27062014CA.pdf

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8970&Mode=0

 

IRS considering OVDP 2012 modifications to ease penalties for non-willful violators

IRS finally realizes the need to modify OVDP 2012 to accomodate non-willful violations of overseas account/ income reporting obligations. JOHN A. KOSKINEN, Commissioner of IRS, while speaking at a conference stated that IRS is considering making program modifications to provide an opportunity for non-willful violators to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas. IRS also plans to accommodate U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties. Text of address of IRS Commissioner, John Koskinen: http://www.irs.gov/PUP/irs/Commissioner%20Koskinen’s%20Remarks%20at%20US%20CIB%20and%20OECD%20Int%20Tax%20Conf%20June%202014.pdf

FBAR DEADLINE FOR 2012 & OFFSHORE VOLUNTARY DISCLOSURE PROGRAM (OVDP)

Deadline for FBAR filing for 2012 is June 30, 2013

The due date for filing of the FOREIGN BANK & FINANCIAL ACCOUNT REPORTING (FBAR) Form TDF 90-22.1 is June 30, 2013. FBAR Form may be required to be filed if a US taxpayer has a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account.

FBAR form and instructions had been revised in 2012 to reflect the amendments made by the final regulations. The requirement as per IRS guidelines is that if at any time during the year, the aggregate of balances in overseas accounts was more $10000, then reporting has to be done by filing this form. This filing is independent of the Filing of Federal and/ or State Income Tax returns. You may be required to provide information even when you have signature or other authority but no Financial interest in the account.
New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938) w.e.f. from 2011 onwards

In addition to the FBAR filing, Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. This Form is part of the Tax return and accordingly must be filed by the due date of Individual tax return in Form 1040.

If taxpyers are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), they may be subject to a penalty of $10,000.

OFFSHORE VOLUNTARY DISCLOSURE PROGRAM 2012 (OVDP/OVDI) STILL OPEN

The IRS is also currently offering people with undisclosed income from offshore accounts an opportunity to participate in a new, voluntary disclosure initiative in order to get current on their FBAR filings and tax returns. The program is similar to the 2011 Offshore Voluntary Disclosure Initiative (OVDI) in many ways, but with a few key differences. Unlike OVDI 2011, there is no set deadline for people to apply – at least as of now. The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Taxpayers participating in the new initiative must file all original and amended tax returns and include payment for taxes, interest and accuracy-related penalties.

If anyone would like to avail of the benefit of Amnesty under 2012 Offshore Voluntary Disclosure Program (OVDP/ OVDI) and would like our assistance for the purpose, they could call us to make an appointment.

 ____________________________________________________________________
NEERAJ BHATIA, AICWA(India), FCA(India), CPA(USA), LL.M.(International tax)
Chartered Accountant (India) and Certified Public Accountant (USA)