Now on the books for 3 years, banks, brokerage firms and the IRS are gearing up for FATCA, the Foreign Account Tax Compliance Act. Although twice delayed, the new law will be in force beginning next summer. FATCA requires foreign banks and other financial institutions to review their accounts and report any with ties to the United States. The law covers anyone with an offshore account including Indian Americans (dual nationals) and Indians working or living here with a green card (resident aliens). Unfortunately, many such folks are simply not prepared.
Owning a foreign account is completely legal if the account is properly reported. U.S. law requires that any taxpayer with more than $10,000 in offshore accounts must disclose those accounts on his or her individual income tax return (Schedule B) and on a Report of Foreign Bank and Financial Accounts (FBAR for short).
Failure to file FBARs and report an offshore account can be a felony if willful and can carry huge civil penalties as high as $100,000 per account or 50% of the highest account balance in any year the account was not properly reported.
In anticipation of FATCA, the IRS has offered several amnesty programs. The current program is called OVDP or the Offshore Voluntary Disclosure Program. Unfortunately, many of the people that could benefit from amnesty – or several of the other compliance initiatives of the IRS – don’t even know they have a reporting requirement.
Earlier this year the Indian paper Business Standard noted that there was little awareness of FATCA. We certainly believe that. Frequently we hear from Indians who call in a panic when they learn they have a filing requirement. Since many Indian families span two continents, it is not uncommon for Indians here to send money home to an account in India to help family. We also see Indians who moved here yet maintain a demat or NRO account in India. All these folks have potential filing obligations in the United States.
Although some folks might elect to simply wait until they are caught, that strategy is flawed. The IRS says that if they find you first or if your name is turned over by a foreign bank because of FATCA, all bets are off and you are no longer eligible for amnesty.
There are tens of thousands of Indian Americans or Indian green card holders that have yet to come into compliance with U.S. offshore reporting requirements. Time is running out to voluntarily comply with reduced or no penalties. If you have an unreported bank account at HSBC India, State Bank of India, Sharekhan Limited, Kotak Securities, ICICI, or the Punjab National Bank, contact us immediately. Our tax lawyers are well versed in FATCA compliance, FBARs and other foreign reporting issues.
For more information, contact attorneys Brian Mahany or Navdeep Singh at or by telephone at (414) 223-0464. We will explain your responsibilities and explore your options. Our tax lawyers have helped many taxpayers with a wide variety of foreign reporting problems including FATCA, the Offshore Voluntary Disclosure tax amnesty program and unfiled FBARs. In many cases it is possible to avoid all or most penalties. All inquiries protected by the attorney client privilege and kept in strict confidence.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.
Need more information about unreported foreign accounts? Our Due Diligence blog has a search engine located in the upper right hand corner. Our website also has an article titled FBAR 101 – Critical Information for FBAR Filers which may answer many of your questions.
Post by Brian Mahany, Esq.