20th June 2014

In Year 2009 and 2011 the Internal Revenue Service (IRS) offered schemes of Overseas Voluntary Disclosure Initiatives (OVDI) and in year 2012 Offshore Voluntary Disclosure Programme(OVDP).

2.    Under OVDP scheme,  tax-payers are required to pay tax on hitherto undisclosed income of earlier eight  tax years together with interest thereon and in addition a penalty of 27.5% of the highest balance of hitherto undisclosed foreign bank accounts and / or value of foreign assets over the last 8 years.

Recently on the 18th June '14  IRS has offered new Streamlined Filing Compliance Procedures for  Residents - “Streamlined Domestic Offshore Procedures” and for Non Resident  - “Streamlined Foreign Offshore Procedures” .

I.    Brief details and links of IRS websites as regards Streamlined Domestic Offshore Procedures are :-

 
1.    ELIGIBILITY : 

.01     Individual must be US Resident i.e.a US citizen or Green Card Holder who has resided in USA and  has not been physically outside US for more than  330 days in most recent three years.

.02    Should have filed US Tax returns of last 3 years within due date or within extended time applied.

.03    Failed to disclose foreign income and pay tax under IRS and/or  failed to file an FBAR - Form TD-F90-22.1 (Report of Foreign Bank And Financial Accounts)  with respect to foreign financial assets.

 2.    REDUCTION OF PENALTY :

 1.    The original penalty of 27.5% was payable on maximum aggregate overseas balance during the last 8 years which is substantially reduced to 5% of maximum aggregate value of Overseas Financial Assets as at the year end of last 6 years.

3.      PROCEDURES :

.01     Tax payer must file amended US Tax Returns together with all required information for last 3 years.

.02     One should file delinquent FBAR (New Form FinCEN 114) of last 6 years for which due date has passed.

.03     One is required to pay tax, interest and 5% offshore penalty on aggregated highest balance of all foreign financial assets as at end of last 6 years. 

4.      OVDP OPTED ALSO BENEFITED :

1. Tax payers who have already opted for OVDP and submitted their applications are also eligible for this concessional penalty of 5% .

2. In such cases the tax payers are required to submit voluntary disclosure letter under the streamlined filing compliance procedures.

5.      Separate details are provided for US tax resident residing in USA and also residing outside USA .

.01     Details for Residents of USA are at  : http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States

.02    Where as details for US Tax Residents  residing abroad can be found at :

http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States

Best wishes.