High-Level Compliance Overview for Undisclosed Foreign Accounts
This article does a great job at giving a high level overview of the IRS programs for coming back into compliance with undisclosed foreign financial accounts, unreported foreign income and potentially unidentified foreign corporations or trusts. The author gives pro and cons for Ovdp versus streamline and details the crux of the streamline program as the certification of non-willfulness.
The end of the article makes brief mention of the Delinquent Fbar and International Informational Reporting programs. A couple of items to highlight are as follows:
1. The author differentiates between the Ovdp penalty based on the highest aggregate balance versus the Streamline Domestic penalty based on the highest year-end aggregate balance. The author also indicates that some items can be left out of the Ovdp penalty base, if there was no non-compliance, versus all items being included in the Streamline Domestic penalty base.
The above analysis can be very complicated. Especially when you add in joint accounts versus single accounts for married taxpayers, signature authority accounts for businesses or “soon-to-be inherited” accounts from parents. One should make sure to get a clear outline from a designated Federally Authorized Tax Practitioner on the penalty base comparisons as part of the decision making process of whether to enter into Ovdp or Streamline.
2. However, the author fails to mention the statute of limitations on Fbar and income tax returns for audit or examination through the Streamline Domestic Program. Generally for Fbars, there is a six year statute of limitations (see IRM 4.26.17.3.1.2(D)) and for income tax returns, a three year statute. The benefits of Ovdp are based on the 906 closing agreement that closes the statute of limitations on both. With Streamline, the statute of limitations hangs open for the time period mentioned above.
3. Last but not least, the audit or examination risk of both programs needs evaluation. It should be noted that under both Ovdp and Streamline, there is considerable audit risk for each tax return that is submitted in regards to both domestic and foreign items. Taxpayers should take any unreported or incorrectly reported domestic items into consideration. These issues are commonly overlooked, as most tax practitioners are focusing on just the foreign income issues.ig
Italy Ratifies IGA Terms
On July 9th, 2015, the United States and Italy ratified the terms of the previously signed Inter-Governmental Agreement (IGA) for the exchange of tax information under Fatca. This ratification starts the process in which the Italian government can write and implement regulations for the collection and dissemination of Fatca information from the general public. Those US taxpayers with undisclosed foreign financial accounts in Italy should seek immediate assistance from a Federally Authorized Tax Practitioner familiar with these issues.
India Signs Model 1 IGA
On July 10th, 2015, the United States and India signed off on a Model 1 IGA, which starts the exchange of information with the United States as of September 30th, 2015. US taxpayers with undisclosed foreign financial accounts in India should immediately act and attain assistance from a Federally Authorized Tax Practitioner familiar with these issues.
There are many misconceptions in the Indian-American community as to the taxation of income that India is non-taxable. Taxpayers need to know that just because a type of income is classified as non-taxable in their home jurisdiction does not mean they are so in the United States.
Both U.K. and U.S. Filing Requirements
Recently, I have dealt with several taxpayers that were determined to have filing requirements in both the United Kingdom and the United States. This can be a tricky analysis as both systems are unique in their approach. This article gives a broad overview of the U.K. filing system as it relates to corporations or businesses. Issues like transfer pricing, VAT tax and the stamp taxes should all be analyzed when determining the total tax liability in the United Kingdom.
Legal Ramifications for Violation of Swiss Bank Secrecy Laws
This article discusses the legal ramifications for individuals who violate Swiss Bank Secrecy laws. The old law gave an individual convicted of such violations up to three years in prison. The new law adds extra bite by not only increasing the prison sentence to five years, but also expanding the net of potential violators to non-bank related individuals.
Two More Swiss Banks on IRS Ovdp Black List
On July 9th, 2015, the Department of Justice signed off on two new non-prosecution agreements with Banque Pasche SA and ARVEST Privatbank AG. There are now close to thirty banks or financial institutions on the IRS black list for the Ovdp program (which causes the misc. penalty rate to jump from 27.5% to 50%).
Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million. Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million. Banque Pasche will pay a penalty of $7.229 million.
Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million. ARVEST will pay a penalty of $1.044 million. The Department of Justice continues its “hot summer” as it marches onwards with the closing agreements for banks participating in the Program for Swiss Banks.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of offshore account cases.
