Indian Americans seek relief from US tax rules for foreign accounts

NEW DELHI: Major Indian American civic and professional organizations in the United States with a substantial membership have joined together to campaign with the US administration seeking relief on penalties stipulated by US tax rules on foreign bank accounts.  Following a letter from GOPIO delivered on June 27 to Timothy Geithner, Secretary of the US Department of Treasury, representatives of four major Indian American community groups; the Global Organization of People of Indian Origin (GOPIO), National Federation of Indian American Association (NFIA), American Association of Physicians of Indian Origin (AAPI) and Asian American Hotel Owners Association (AAHOA) under the aegis of a National Coordinating Council sent a letter on July 19 to US President Barak Obama seeking his assistance in this matter of urgent concern to the new US immigrants of Indian origin who are facing unfair and unprecedented penalties for failure to disclose and do tax filing of foreign bank accounts by August 31, 2011. Copies of the letter were also sent to Secretary of State Hillary Clinton and Treasury Secretary Tim Geithner. The joint letter affirmed the community's recognition of the necessity for the IRS  to take needed actions and enact rules to track money flowing to terrorists, drug transaction and money laundering in safe havens outside the United States. The groups have requested that the IRS review and reconsider the rules towards more practical and prudent application.  The United States Internal Revenue Service  (IRS) announced on February 8, 2011 a special voluntary disclosure initiative (Ref IRS News Bulletin IR-2011-14, Feb. 8, 2011) 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. The new voluntary disclosure initiative will be available through August 31, 2011.  "The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The first special voluntary disclosure program closed with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world. These taxpayers will also be eligible to take advantage of the special provisions of the new initiative". "For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties of 2 percent".  While the United States has a rapidly increasing population of Indians and persons of Indian origin who are contributing significantly in all areas of the US economy and society, many in the Indian American community were not aware of the first voluntary disclosure program which ended in 2009. The Indian American media also was not aware of 2009 voluntary disclosure program. Many people holding foreign bank accounts were unaware of these rules simply because these rules were never publicized by the IRS to the general public. Even most accountants preparing and filing the annual individual tax returns did not inform or alert their clients about this requirement. It also appears that certain communities have been singled out for investigation which is highly damaging to the multi-ethnic ethos of our country. The appeal is for universal application of the law on an equitable basis, on the principle of fairness and in good conscience without undue burden to the US taxpayer. The request further stated that strict application of compliance with the law on hard working Americans who are not aware of the law can lead to undue and irreparable distress, as well as unforeseeable consequences for a large number of innocent citizens who did not consciously or knowingly violate the rules.  The letter further states that the community is becoming aware of the new regulations on foreign accounts and is in full agreement that all citizens must be in compliance and pay all taxes due to the US government.  The Indian community in the USA, by and large, consists of very progressive, hard working and law abiding citizens who do not deliberately or intentionally violate any US laws or IRS rules governing taxes due. In many cases, people had transferred money to have a retirement income or home in the foreign country, or to provide support for extended family in the foreign countries. There was no deliberate intent to avoid taxes on interest earned during the process of acquiring homes or supporting family or saving for children's education. It was not planned to be unjustifiable enrichment.  Now that the groups have become aware of this IRS initiative, the impending deadlines, and potential consequences, they have offered to use their networks to inform and urge full compliance. However, the groups have requested that the remedies fully described in the July 19, 2011 letter to President Obama be considered and enacted.

These include:
·Request that penalties of 25% Foreign Bank and Financial Accounts (FBAR) penalty on assets of law abiding citizens be eliminated, that presumption of guilt is not a fair and equitable application of law; that penalty on the highest value of the assets is immoral and unfair; that penalties on assets as stated in the rules on foreign accounts should not be levied on law abiding citizens who missed declarations or filing deadlines due to lack of information or timely notification.

·Request that the IRS deadline be extended to December 31, 2012 to allow more persons who were not previously aware to fully comply. GOPIO is urging organizations, institutions and individuals to fully comply and pay any taxes due in an expeditious manner before the deadline.

·Request that the 20% accuracy penalty on undeclared taxes be substantially reduced for those who did not knowingly miss the filing deadlines.

·Request that the US Government should publicize the Voluntary Disclosure Amnesty Program in ethnic newspapers and other community media in multiple languages, as well as IRS representatives be interviewed by print, radio and television media to bring about more awareness resulting in compliance by more tax payers.

The joint letter was sent by GOPIO Chairman Inder Singh, NFIA President Lal K. Motwani, AAPI President Dr. Sunita Kanumuri and AAHOA Chairman Hemant D. Patel. Since sending out the letter, Federation of Indian Community associations of Cleveland (FICA) and Federation of Indian American Associations (NY, NJ and CT) have joined the effort along with Lueva Patidar Samaj. The groups are reaching out to all Indian community groups to join this effort.