My OVDI Progress
This is a longtime overdue post. In this post I will update my OVDI progress.
Disclaimer: This is my own experience and this SHOULD NOT be taken as legal advice.
Oct-2012: I noted that links are updated for OVDI 2012. Find them here: http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program
Application Progress
02/15/2012: I decided to go with Attorney1. He was convincing and told me exactly what he will do, how long will it take and what are my chances on lower penalty are. His suggestions matched with my online readings and research. Though his charge seems a bit higher, but unlike others, with him I knew the cost upfront. Plus he was going to do all paperwork for me and I am just suppose to sign and pay any penalties/back taxes.
02/25/2012: So far my attorney got pre-clearance for OVDI from IRS i.e. now he can go ahead and submit the OVDI Letter . What is pre-clearance? Read OVDI FAQ #23. What is OVDI Letter? Read OVDI FAQ #24.
03/16/2012: Got an update from the attorney that my case is preliminary accepted for OVDI. So now he will do tax amendments and submit the OVDI package that will mainly consist of stuff mentioned in OVDI FAQ #25 i.e. previous year original and amended tax returns for year 2003 to 2010, bank statements and delinquent FBAR’s for the year I didn’t report.
05/15/2012: Attorney sent me the prepared delinquent FBARs, amended tax returns (Form 1040X) for each year I forgot to report my NRE interest and noted the amounts I owed to IRS. I signed those forms and also sent separate checks for each tax-year I owed to IRS.
05/30/2012: Sent a completed Form 872 (Consent to Extend the Time to Assess Tax) and document “Consent to Extent the time to Assess Civil Penalties for FBAR Violations”
06/2012: Got notification from attorney’s office that my OVDI documents package is submitted to the IRS. To my knowledge the package consisted of:
- Cover letter
- Copy of pre-clearance received earlier
- Copy of Amended tax returns 1040X
- Copy of foreign bank account(s) statements
- Original delinquent FBARs
- Consent documents mentioned above (Form 872 and Extend FBAR Statue)
- Statement of Highest aggregated foreign accounts balance
- Power of Attorney to allow the attorney represent me
04/2013: Attorney sent a status inquiry to IRS to find out what’s happening with my case.
06/2013: IRS replied saying no status update. Just need to wait 45 days before making another inquiry.
07/2013: I think an officer is assigned to my case as my attorney got query asking for some more details. I am not sure what they have asked for though.
07/2013: The query was asking some clarifications on my account balances and transactions. Attorney replied to the query along with new POA and Form-872.
09/2013: Received 3-copies of Form-906 and penalty calculation sheet 4549-A. The calculation sheet showed the 20% penalty on the taxes I didn’t pay (i.e. taxes on foreign account interest income) and 12.5% Offshore Penalty. It gave time of 14 days to reply with signed copies 906 and the checks for the amount mentioned on 4549-A. I was fine with the penalty amount and so I signed the forms and sent it to my attorney office. Attorney sent those to the assigned agent with a cover letter.
Check this: What should I do once I receive IRS 906 forms?
Note: If you think the penalty is too much and if you wish, you have an option to opt-out of OVDP. In this case don’t sign the 906s but then you will have to go through the regular tax audit process. Check this: Opt-Out Guide
12/2013: Received the final case closed letter from IRS. Two separate letters. One is signed consent form 872 and another one is signed 906. These were the both I sent earlier and they returned with the agents signature.
01/2014: Attorney prepared the amended State tax returns. Had to pay minor tax. As per the attorney, State tax department will directly send me bills for any penalties and interest.
Current Status: Filed the amended State returns. Waiting for the State department to confirm everything is fine.
Are you looking for a tax attorney for OVDI?
Read my blog post: Finding a tax attorney for OVDI
Resources
- Documents lists: Read OVDI FAQs –#24 and #25
- Offshore Voluntary Disclosure Initiative Documents and Forms
- Consent to Extend FBAR Statute
- Opt-Out Guide
- What should I do once I receive IRS 906 forms?
Hope this helps. Let me know if you have any questions or share your own experience in comments below.
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Desi Ways 
Can you recomment your attorney?
Hello Manjit
Please help me with my question in the previous post.
Hello
For 2015 filing my auditor suggested not to show any foreign accounts or interest (Schedule B and FBAR). But I have been filing all the previous years. I am yet to file my 2016 tax returns and I think I am in a dilemma. Following are my questions:
1. For 2016 if I file Schedule B showing interests from overseas bank and file FBAR, would there be a problem since I did not file for the year 2015?
2. Would there be a problem if I file amendment and FBAR for year 2015 without going through the Streamline or the OVDI?
In 2015 my bank a/c may be in the amount of around $85000 and interest earned may be around $5500.
Please provide recommendations on what to do. Thank you
As a CPA my advise is to be in-compliance 100%, what logic do you have to have not reported the interest and filed the FBAR. You are in a very tough spot, since you were doing it in the past and skipped one year.
Hi desiways,
Could you please share your OVDI attorney’s details?
Thanks,
Arun
Hi Manjit,
1) I have 2 LIC Jeevan Anand policy form 2008, I am entering to OVDP , I could not able to get the surrender value for the previous years, the LIC agent told they can give only for the current year and not for previous years, so in this case can I use Cost Method for showing interest at the time of maturity.
2) do we need to submit Form 720 if we have LIC Jeevan Anand policy
Thank you
Hi Manjit,
please help me.
for 2009- 2011 came to us in B1 Visa , but in 2009 I came two time and my stay is more than 183 days , during my B1 visit,I received perdiem $30/day for Food.
and 2012-2014 is H1B.
so In this case if I apply for OVDP do I need to include 2009 to 2011 for FBAR and file the return.
Please help me
Hi Manjit,
please help me.
for 2009- 2011 came to us in B1 Visa , but in 2009 I came two time and my stay is more than 183 days , during my B1 visit,I received perdiem $30/day for Food.
and 2012-2014 is H1B.
so In this case if I apply for OVDP do I need to include 2009 to 2011 for FBAR and file the return.
Please help me
Hi Manjit,
I have LIC premium policy , NSC bond. In the OVDI how to show the interest? because the LIC agent told that for previous years we cannot get surrender value only for current year.
in this case for LIC can we show the interest at the time of maturity?
For NSC bond can we show the interest at the time of maturity or since we know the percentage , do we need to manually calculate and show the interest.
please help me.
Thanks
Hi Desi Ways,
I came to US in 2012 ,first year I filed with HnR , then I filed my self , then I filed through CPA, But I don’t know I have to include the Bank account and interest earned on that but this year CPA told me if I transfer more than $10,000 we need to file FBAR and Interest earned on that. then I did some search on FBAR, I cam to know that we need to file all previous year not only bank account , we need to include PPF, LIC,NSC,etc…
then I tried to get information from other tax firms to get the detail and they found in my previous return I have Employee business expenses which is not applicable for me and they asked me to amend it.
so for this year I filed Extension ,
please advice me as to which process should I follow to ensure that I do everything correctly in legal way. I need advice as to where do I fall into:
1. Streamline with 5% Penalty
2. OVDI with 27.5% Penalty
3. do I need to do with current CPA (not much knowledge on FBAR) or other Tax firm with knowledge FBAR.
Thanks,
AA
Hi Desi Ways,
I came to US in 2012 ,first year I filed with HnR , then I filed my self using Tax Act, then I filed through CPA, But I don’t know I have to include the Bank account and interest earned on that but this year CPA told me if I transfer more than $10,000 we need to file FBAR and Interest earned on that. then I did some search on FBAR, I cam to know that we need to file all previous year not only bank account , we need to include PPF, LIC,NSC,etc…
then I tried to get information from other tax firms to get the detail and they found in my previous return I have Employee business expenses which is not applicable for me and they asked me to amend it.
so for this year I filed Extension ,
please advice me as to which process should I follow to ensure that I do everything correctly in legal way. I need advice as to where do I fall into:
1. Streamline with 5% Penalty
2. OVDI with 27.5% Penalty
3. do I need to do with current CPA (not much knowledge on FBAR) or other Tax firm with knowledge FBAR.
Thanks,
AA
Dear Desi Ways…
Need your help and advice just like others. I am GC holder since 2011 before that I was on H1B. When I received my GC in Aug 2011 I was in India working on Indian salary until March 2012 and moved back to US in March 2012 ( worked in US) and returned back to India in May 2013 since then I have been staying out of US on re-entry permit. Every year I have filed taxes on time (Jointly).
In my case there are couple of issues: I have filed FBAR when I transferred money to India based on the advice of CPA “If you have transferred more than $10K you need to file FBAR”. So when I transferred money i filed FBRA with just the bank acc number where I transferred money. Without any knowledge I did filed FBAR incorrectly and also missed 2 years of filing FBAR (did not file FBAR in 2013 & 2015 as I did not transfer any money from US in 2012 & 2014).
In moving back and forth between India & US plus due to parent’s health issues & I did not have job in India until Aug 2014 with multiple circumstances on personal front I did not pay attention to foreign account income and have missed out on reporting some of the income since I got GC. This was also due to lack of advise from my desi CPA as i was filing from India.
In meanwhile since 2013 I have opened several accounts like PPF, HUF, additional bank accounts, insurance, and mutual funds. Plus we have very small rental income as well.
This year when I started reading about FBAR & other Tax related blog I realized what mistake I have done unknowingly. Currently I am in India on Indian salary and it is even more difficult to reach out to right person for any advice in US.
As there is no way to tell or show that what I did was not willful and it was also due to my circumstances as well i feel i am in a very muddy situation.
I am looking for some advice and guidance as to which process should I follow to ensure that I do everything correctly in legal way. I need advice as to where do I fall into:
1. Streamline with 5% Penalty
2. OVDI with 27.5% Penalty
3. Or should I amend 6 years FBAR & 3 years taxes
Just one question on OVDI is its 27.5% flat tax or are there other charges also applicable.
Note: I need to file my taxes ( Have taken extension) and file FBAR correctly this year
I look forward for your reply at your earliest possible convienince.
Many thanks in advance for your time & help,
VS
Hi VS,
Please let me know, What step you have taken Streamline or OVDI , did you filed FBAR and Tax return this year. did you applied through CPa or Attorney.
Please help
Hi VS,
Please let me know, What step you have taken Streamline or OVDI , did you filed FBAR and Tax return this year. did you applied through CPa or Attorney.
Please help
Hi Desiways,
Thank you for all the information you are sharing. It is really valuable. Here is my situation:
1. I have been filing FBAR since 2010 but did not file 8938 and did not pay taxes for the interest earned in India because My Ex-CPA did not advice me on this.
2. This year I received letters from Indian banks asking for my FBAR information, which triggered me to converse with my Ex CPA and he told he told me that he is NOT familiar with the FBAR/8938 procedures. So, I went to a Desi CPA and this year (2015), I filed both FBAR and 8938 with all the required taxes for all my all foreign interest income also.
3. Now I need to file amendment from years 2010 to 2014 to update the FBAR and add 8938 forms and pay taxes for the unpaid interest earned during that year.
4. I have paid all my taxes for all the income I earned so far. The unpaid foreign interest are Not a willful conduct. My Ex CPA did not educate me on this.
Now the question is what are my options:
1. Can I go follow ‘Streamlined Compliant Process’ or Do I have to go thru OVDP?
2. If I follow ‘Streamlined Compliant Process’, Do I have to hire a Tax Advisor or I can go work with my current Desi CPA?
3. There is something called ‘Quiet Disclosure’. How different is this from ‘Steamlined Compliant Process’
Please suggest.
Thanks in Advance,
SM
If you filed FBAR all the time, main thing is to amend the tax returns for the interest income.
I am not familiar with 8938, so can’t say much on it. It came later and I never had to deal with it so don’t know about its implications and process if you missed.
Quiet disclosure means you just try to clear your mistake without explicitly notifying IRS and not following their process and kind of avoiding any penalty. I would go with a CPA if you ate sure you want to clean the past mess. As I said I am not sure if about 8938 but ovdi was for missed fbar, which you said you always filed.
Hi Desiway,
I need some help on filing Form 14457 , this I filed 2015 return with FBAR , now in the form 14457
Question 10. Please check the box to estimate the annual range of the highest aggregate value of your offshore account
here do I need to include year 2015 or not.
Thanks
SM. and Desiwys:
Form 8938 is nothing different than the former d 98.20 etc etc and current FINCEN 114, except that 8938 is includable as part of your income tax filing form 1040. It has no tax implications, it is an informational form to let the IRS know you have 100,000 or greater overseas. Filing this does not relieve you of your obligation to file the FINCEN114 by June 30. Basically it is the same information except they go to different branches of the Homeland security administration. FINCEN goes to Bank Secrecy Act while the other one goes to the Internal Revenue Service, under the US Department of the Treasury.
SM: If you were required to file FIN CEN earstwhile TD …. form and you did at least you are in the clear on the 5% offshore penalty aspect of the Streamline Offshore Disclosure program.
Not filing of the form 8938 you are considered as not having filed your 1040 income tax return accurately and completely.
First question is did you have funds overseas greater than 100k and required to file? If so there is a procedure to amend the 1040 and include the form in the amended package. you will be amending your 1040 anyways to pay taxes on the undeclared income anyways.
Secondly, even if you go through ‘quiet disclosure’ you still will be filing the amended returns. THE IRS DOES NOT RECOMMEND ‘quiet disclosure’.
The difference under the quiet disclosure and SDOP is simple, quiet disclosure does not provide you with any kind of assurances of safety net if the IRS finds out of your ‘lack of compliance’ where as in the SDOP there are very very limited assurance while under the OVDP (where the penalty is 27,5% lack of misrepresentation you are given assurances that you will not be prosecuted criminally.
Also I would like to add here that in the SDOP process, you will be required to provide a statement under penalty of perjury of your non willful ommission. You will have to come up with a very convincing logic as you were filing the FBAR and how come you were not aware that you needed to pay taxes on your foreign account holding earnings. From the IRS prespective they go hand in hand. You are aware of one aspect, you are aware of the other aspect as well. THis I am commenting based on experience regarding one client we have represented. In this situation the agent assigned to work did not accept the non willful certification.
Hope this helps and we welcome any other comments from readers of this forum about their experiences.
Good Luck. SM
Hi Manjit,
this year I filed extension and filed FBAR for 2015 and yet to file return , If I want to enter OVDP, do I need to include year 2015 or prior to year 2015.
Entering the OVDP or SDOP is to correct your omission of failure to comply with the filing requirements of the Foreign Bank Account Report (FBAR) currently the form is FINCEN114. SInce you already filed on June 30, 2016 the report as for the period ended december 31, 2015 you do not have to include tax year 2015 into the mix of complying with the OVDP or SDOP.
You just need to be vigilant and comply with the income tax reporting obligation, i.e. include in your return of 2015 the foreign earned income from any and all sources, such as interest, gains on mutual funds, stocks and bonds, sale of property (ies) etc.. And of course if you have paid taxes, or taxes deducted at source (TDS) claim credit for that. Remember this is also includable on the state return if you live in a state that has income taxes.
hope this detailed explanation helps. If need additional info call the office.
Hi Manjit,
I have LIC premium policy , NSC bond. In the OVDI how to show the interest? because the LIC agent told that for previous years we cannot get surrender value only for current year.
in this case for LIC can we show the interest at the time of maturity?
For NSC bond can we show the interest at the time of maturity or since we know the percentage , do we need to manually calculate and show the interest.
please help me.
Thanks
Hi Manjit,
I have LIC premium policy , NSC bond. In the OVDI how to show the interest? because the LIC agent told that for previous years we cannot get surrender value only for current year.
in this case for LIC can we show the interest at the time of maturity?
For NSC bond can we show the interest at the time of maturity or since we know the percentage , do we need to manually calculate and show the interest.
please help me.
Thanks
Hi, Please let me know, What step you have taken Streamline or OVDI , did you filed through CPA or attorney? please help me
Dear Desiways: Can you please send share the attorney who helped you?. You are a very good source for folks who are in this situation.
I have a general question. I have not filed these forms either but I am planning to go back in a few months for good back to India. I just came to know now.
Any input as to should I go into OVDI at all or not? I have been partially filing my FBAR and other forms for most of my bank accounts but not for mutual funds. I also didn’t know we needed to do this for LIC/PPF etc. nobody told me.
Can I just pay the backtaxes/amend the returns and just leave and not worry about OVDI etc?
Any input on this?
Mandip,
I am also one of the thousands who is caught up in this mess. I came to US in 2012 and have been filing all my taxes in India(for Indian income) and US(for US income). I have no intention of settling here and plan to go back in 2-3 years. I am really in a big dilema as what to do. Request you to pls advise
I have 3 years of non filing of FBARS(less than 50k every year and some income(less than 2.5k every year which is mainly interest from savings account and ppf)
Recently IRS published, FBAR mitigation guidelines. Haven’t seen many people discussing it in general but its right there in IRS website ( https://www.irs.gov/irm/part4/irm_04-026-016.html#d0e1614 ).
It categorizes the penalty based on offshore balance as well as willful/non wilfull (>50k, 50 – 250k and 250 and beyond).
The penalties are considerably less even for wilful violation (not like the draconian as per the original FBAR). Request you to pls clarify on these.
1.) Are they binding if the eligibility criteria are satisfied?
2.) Are they even applicable if there’s some unreported income for the years FBAR was not filed. I am planning to file my FBAR and report all income starting this year, so that in worst case my exposure is only limited to 3 years
3.)I have 3 years of non filing of FBARS(less than 50k every year, so I am on level 1) and some income(less than 2k). Assuming I start filing correctly my assets as well as income from this year and there’s an audit for past years, Will this mitigation guideline still apply to me ?
4.) If i fully comply starting from this year and report all income and FBAR( i know this is quiet disclosure which is not considered favourable), will these guidelines still apply if get audited, considering I have both unreported income as well as unfiled FBARS for previous years
What will you advise me considering I plan to go back in 2-3 years. I want to get into compliance starting this year to limit exposure, but not sure what to do for previous years. I dont want to get on OVDI and pay 27% (the unpaid tax on reported income is will prob be under 400$ per year).
Will these mitigation guideline apply in case I get an audit for past years.
Thanks
Under the new plan that became effective July 18, Streamline OVD, the penalty is not 27% it is 5%. Requires you to amend your prior three years returns, pick up the income and pay taxes on the missed income. File prior 6 years FBAR (FINCEN114) reports, if applicable. since you came in 2012, 2013 2014 and 2015 are the open years for you out of the 6 years. Your penalty, as per your numbers will be 5% of the highest balance that you had in your bank account during your residence in the United States.
The penalties phase your are referring to in your post, is when you get caught. At that point in time, you do not have the option of participating the SDOP or OVDP sort of ‘Amnesty’ blanket laid out by the US Gov. The tricky part is the non- willful certification. How convincing you are in putting that up together.
You have a misunderstanding.. quiet disclosure refers to doing the amended returns to pick up the income not reported and not filing the FBARS and not paying the penalty. Moving forward is not quiet disclosure, you are just putting yourself on the right track and complying with the law.. Where is the quiet disclosure in this aspect?
You asked for my advise. Follow the rules and the law. if you do have 50k as the maximum balance in any given year, your max penalty is $2500. Plus the cost of seeking professional assistance, if you plan to hire someone to do it on your behalf, Is it not worth that you do not have to keep looking over your shoulders and having sleepless nights that you are not in compliance?
BTW, please note, my name is manjit not mandip, unless your post is directed to someone else, in that case I apologize for the intrusion.
Hope this helps and address all your four issues.
All the best.
Thanks Manjit a lot for the clarification. I would be really grateful if you can answer a few more queries
1.) For reporting FBAR, do I need to actually report the max of each account or can I remove double counting and report the highest aggregate balance that all accounts reached on any given day.
E.g. If i transferred 11000 usd in account A, then from A to B, and then from B to C. Do I need to report all three resulting in a total of 33k or just one with 11k as technically I never ever had more than 11k at any point of time.
3.) I am really confused about reporting PPF and EPF as many tax consultants told me that its not required where as some are telling me it is. For EPF its really difficult to find out how much the balance is, after employer contribution and interest accumulation over the years. I resigned onsite this year and its extremely difficult to get the balance from employer. I though i will withdraw or transfer to a new employer once I return home.
I am thinking that I will look at all my payslips for my portion of epf , then double it for accounting employer’s contribution and add a simple interest at a conservative 13%pa. I guess in actual the pf interest is compounded daily (or may be monthly) at an annual rate of arnd 9.5%. I am hoping calculating simple interest at 13% should make it safely above what it actually is
3.)Is gratuity also considered as reportable income. I resigned and my employer in India payed out the Gratuity but it’s tax free since i was employed for more than 5 years
4.) For Mutual funds, can you let me know till what level the accounts needs to be broken. E.g. everything is consolidated under a CAMS account. Withing that I have mf of multiple amc(like dsp blackrock, kotak). With each AMC i have multiple folio. IS each folio has to be reported as an account. Can i consolidate it at the level of Mutual find (like kotak)? or may be report a single account under CAMS
5.)For mutual funds and shares, I read somewhere that its ok to report the valuation as of last day of the year for FBAR. In your knowledge is it true? Because of multiple SIPS, its extremely difficult to find out the valuation everyday and find the highest (for bank accounts its relatively extremely easy).
Really need your advise. To be safe should i just look at the valuation on last day of year and bump it up by 50% for FBAR reporting to ensure i dont under-report. The indian stock market corrected itself in the latter part of the year so I hope this should be safe for reporting requirement. I am really getting paranoid and none of the people I ask know the answer.
Frankly,most of the tax consultants (including the one i used for two years) don’t know a thing. He down-rightly told me not to report india income to avoid taxes and when i told that i don’t paying a few 100 tax rather than risk losing so much he said things like if foreign assets is are funded from usa money(after taxes) then its not required.
Thanks for your time and help
Manjit Singh Ji, Nice post and thanks for the detailed clarification. I have filed for SDOP few weeks ago and I noticed (as my bank balance dropped) that irs has deposited the checks – 3 amended returns and 1 for the penalty . Does this mean they have accepted my SDOP or is this just standard procedure whereby irs deposits the checks and processes the SDOP application later ? Appreciate any insight can you provide. Thanks much.
Deposited checks, i guess you mean they processed the checks and took your money. If so yes, they are processing your tax returns, if the penalty check is also cashed.
If you do not hear back from the agent, upto a six month or a year, it is safe to assume they have no questions. The sad part is, in the SDOP, you will not get any confirmation that you are in the clear as in the OVDP where there is a closing agreement, signed by you and the IRS commission designee
Yes. They did cash the penalty check as well. I was surprised since it has been only a couple weeks since I sent it. I have not received any query yet. From the blog postings and even irs guidance, I expected they would take at least a few months for processing.
Hi, Manjit,
I want to get in SDOP, but my doubt is in 2012 return I filed through HnR , When I verified now In that I gave US intrest $100 , but HnR picked in Schedule B 7a as Yes , Will this be a problem while submitting in SDOP.
7 a => did you have signature authority?
7 b => was it 10k or greater ???? what is identified there?
if the ans there is yes, you will have a difficult time providing a non wilful certificate as you have documented that you were aware of the FBAR filing requirements. Whether you told the HnR or the preparer did it himself. and you did not review the return and signed it off ‘under penalty of perjury’ and now you will have to sign off on the none wilfull certificate ‘ under penalty of perjury’
7a is given as yes
7b is No
And I had greater than 10,000 in my Indian account.
So In this case I am not eligible to participate in SDOP?could you please suggest me , should I go with SDOP or OVDP.
Hi Manjit,
this year I filed extension and filed FBAR for 2015 and yet to file return , If I want to enter OVDP, do I need to include year 2015 or prior to year 2015.
I filed for SDOP almost 8 months ago. My 4 checks (1 penalty and 3 tax amendments) were cashed immediately.. Few months later I got all 3 of my tax amendment processed, small refund checks and notices. However not heard anything about the penalty processing .etc. Wondering what to make of this.. Is this normal for SDOP processing ?
Ashsih,
I’m also in the same boat. came to know about this FBAR recently. Like to talk to you and discuss and believe it will help to draw better conclusions
Hi Ashis,
Please let me know, What step you have taken Streamline or OVDI , did you filed FBAR and Tax return this year. did you applied through CPa or Attorney.
Please share your experience
I did not know about the FBAR and other formalities. Have money in NRE account for the last 6 years but it has only gone down and if I look at the return, it is negative. Then how do I represent this in my amended return thru my statements. The bank statement gives me the amount and the interest but when we change it to dollars amount going in and coming out, it is a negative output. How does IRS react to that. How should I start this process, Amend my returns for last three years, submit FBAR for 8 years, then how do I make a case for willful language. Maybe Mr. Manjit Singh you can help.
Hello All, Seeking Bank Statements clarification. Submitted OVDP pre-clearance 3 weeks back. No update yet. Having NRE & NRO accounts. Aggregate max amount is ~$85K. Would anybody please help with how the bank statements are to be produced? Should the statement be per year per account or can it be a consolidated bank statement per account starting from its opening date (or the beginning date) till required date? Please help.
Hi Rahul,
Did you filed yourself. what is your status now, could you please share your experience.
Hi AA, CPAs advised SDOP. Tax Lawyer advised OVDP. SDOP was least expensive and enticing. OVDP was more expensive but safer. After a lot of thinking,going back and forth with my thoughts, with lots of confusion, I finally bit the bullet and decided to go with OVDP. My ovdp in progress. (Working with a tax lawyer). Followed the OVDP process, pre-clearance, etc , etc. Filed all the required bank statements, forms, cheques, etc in Nov 2015. Now waiting to hear from IRS personnel
Bank statements for each account, by each month or year. Some banks are providing it by month, some banks do provide it as a running totals. We have had clients bring in the computer print out starting from whenever and going to present date of request.
As long as it is based per account, it is easy to review the transactions to trace the highest balance in each account during the period of scrutiny.
Hi Manjit,
this year I filed extension and filed FBAR for 2015 and yet to file return , If I want to enter OVDP, do I need to include year 2015 or prior to year 2015.
No you do not need to include 2015 into the consideration as you are compliant with FINCEN 114 filing by June 30th 2016 for the year ended december 31, 2015. You just need to be vigilant that you report accurately all the taxable income earned overseas in the calendar year 2015 on your 1040. If there is a requirement to file the 8938, that should be done as well.
Hi Rahul, could you please share your contact number.
Does not matter. It can be monthly basis, it can be computer print out on the bank’s letter head start to end.. The point is it is complete and accurate, So that if IRS has an issue it can refer to it and verify what you and your representative has represented or stated is true complete and accurate!
Hi Rahul, I need some help on completing OVDP letter and attachment.
In the Form 14454
10b. How did you make a deposit (e.g., in person, online, phone, ATM, use of third-party, etc.)?
a) if it is Salary account , in this case what value to enter?
b)if I transfer money using online money transfer (Money2India), in this case what value to enter
or for both we have to use 10e in the Form 14454
please help me.Thanks
Hi Rahul,
OVDP Letter and attachment
I have to submit OVDP letter and attachment only 15 days let.
I need some help on filing Form 14457 , this I filed 2015 return with FBAR and income,
now in the form 14457
Question 10. Please check the box to estimate the annual range of the highest aggregate value of your offshore account
here do I need to include year 2015 or not.
please help me.
Thanks
Hi Rahul, Would you know if entering into OVDP causes any problems with H1B renewal, future GC or citizenship?What do you think could be the impact on future GC or Citizenship as a result of participating in OVDP ? I am planning to go for stamping , I need to file the application, Please help me.
I assure you 200% there is no impact whatsoever with OVDP participation. Once OVDP process is closed you are done and no impact on H1-B renewal or GC or citizenship. Its done to be tax compliant. So why would there be a negative impact?
Hi Rahul, please Let me know ,what is your status of your OVDP? after you received closing agreement do we need to amend State tax. what is the procedure need to be followed. please let me know. Thanks
Hi Rahul, please Let me know ,what is your status of your OVDP? after you received closing agreement do we need to amend State tax. what is the procedure need to be followed. please let me know. Thanks
A quick question. I have never filed FBAR and came to know about it recently. I think I likely qualify for Streamlined Domestic Offshore Procedure. However, if I start to work on it even now, looking for CPA/attorney and getting the documents in order, it is unlikely I’ll be able to do that before June 30th 2015.
I know FBAR deadline is June 30th each year but what about the Streamlined filing? Is it also to be done by June 30th or can it be initiated after that as well?
I have to take a related decision by tomorrow morning. Desiways, I’ll appreciate it you or someone else knowledegable on this can please reply ASAP. Sorry, I am demading a quick response but myself was lethargic.
Fbar has deadline of June 30th but streamlined doesn’t. Did you read that streamlined process has a deadline?
I would say don’t miss this year’s Fbar and initiate the streamlined process.
Thanks for your quick response desiways. Do you mean to say that the first FBAR in my case can be filed before filing the Streamlined? I thought once someone wants to come clean, he/she has to first file Streamlined alongwith the 6 FBARs. But can FBAR for the current year be filed first and then the Streamlined.
I am not familiar with on restrictions where you can’t file your fbar if you are planning to go streamlined
My logic is if you don’t file it this year you are adding one more missed Fbar to your list. Although I would say a professional will be able to give you a right guidance.
There are two issues, one is the income tax compliance and the other is informational compliance. Informational compliance is the FBAR filing.
2014 information needs to be filed by june 30, 2014. it is not dependent that you have not filed prior years. your best effort and objective is to be compliant for the year 2014 while you still have time and therefore MUST file it by June 30, 2015.
The prior years will be taken care of when you enter the SDOP.
Hope this explaination helps.
When I went through the OVDI process, I filed the current year’s FBAR first to make sure I didn’t miss the deadline for the year, so there was one less year to account for when doing the penalties.
Hi @Jon or anybody here. Would you know if entering into OVDP causes any problems with future GC or citizenship?
What do you think could be the impact on future GC or Citizenship as a result of participating in OVDP ?
Mr.Manjit Singh,
Under SDOP, the certification form 14654 talks about using a continuation sheet if we have more number of accounts. Is there is a prescribed/published form/format for this continuation sheet OR we could just create our own as per the table given in 14654?
Also when we are sending the amended returns for last 3 years, should we send the copy of the original returns also? I heard that for SDOP we need to send only the amended returns, but wanted to confirm as you are the expert in this subject. Would appreciate if you could advice me asap. Thanks a ton
Greetins Common Man;/
Option one. create an excell sheet and use the same columns from the form and input information there and carry it over to the form with the inscription see attached work sheet number xyz.. etc..
or
use additional forms and just fill out the items listed. Mostly we have created a worksheet and attached it along with the document. at the bottom of the document we have usually in the past written a statement and signed that the information is under penalty of perjury. use the exact words from the signature section, just in case some one objects that it is not under penalty of perjury.
Amended returns, THere is no need to provide the original returns as the IRS computers already has it and the summary is included on the 1040x as the starting point. I usually add the actual return as amended and then carry over the numbers on the 1040X.
Please do not forget to write in RED COLOR :
Stream Line Domestic Offshore Program on each of the 1040X on front page, honestly it does not hurt to put it on the second page as well.
If you are doing it manual 1040X left hand side write your name and ss number on page 2 of the 1040X as well. IF it is computer generated it may already print it, depends on the software you use.
One last thing, once you have completed the federal return, if you are subject to the state income taxes as well then do not forget to amend the state returns as well.
best of luck.
Mr Manjit Singh,
Thanks for your inputs. In 14654 as the first column is financial institution, can we group all accounts under each bank and show individual account number and amount under each bank?
Secondly I have multiple small rupee deposits (each having its own account no) in a bank with a common customer ID. Can I show the account number as – dep no 1/dep no 2/ dep no3/ dep no4/… in for 14654 and 8938, as one account?
When you said you “usually add the actual return as amended” did you mean you send a copy of the original return and mark it as amended”?…sorry I didn’t get that.
Also, does life insurance policy (Life Insurance Corporation of India) and a indian company public share (stock) come under “deposit” or “custodial” or under “other foreign asset” in 8938? The public stock is in my name and not held in any financial account or by a financial institution.
Appreciate your advice on this. Tks
Mr Manjit Singh, can you help with your advice on this. Tks
Thanks for your inputs. In 14654 as the first column is financial institution, can we group all accounts under each bank and show individual account number and amount under each bank?
Secondly I have multiple small rupee deposits (each having its own account no) in a bank with a common customer ID. Can I show the account number as – dep no 1/dep no 2/ dep no3/ dep no4/… in for 14654 and 8938, as one account?
When you said you “usually add the actual return as amended” did you mean you send a copy of the original return and mark it as amended”?…sorry I didn’t get that.
Also, does life insurance policy (Life Insurance Corporation of India) and a indian company public share (stock) come under “deposit” or “custodial” or under “other foreign asset” in 8938? The public stock is in my name and not held in any financial account or by a financial institution.
Appreciate your advice on this. Tks
Mr Manjit Singh
After sending the SDOP package to IRS, for the state return amendments, what all we need to send to the state along with the state amended returns? Do we need to send any explanation/statement for non-compliance? Do we need send the copy of the entire SDOP package?
Also if we are resident of one state and worked in another state as a non-resident, what all do we need to send along with the amended return for that non-resident state (For ex: if one is a resident of New Jersey, but works in New York City (but non-resident of New York City)?
Would appreciate if you could help advising on this. Thanks
With respect to the state amended returns, you need to attach a copy of the IRS form 1040 which provides you the basis for the 1040X as corrected numbers. You do not need to provide the complete package. States are not concerned with that.
WIth respect to the resident and non resident state returns, you will need to amend both the returns. I can not comment on it much as each state has different rules, primarily, please understand that the change in he adjusted gross income will affect the non resident state hence the suggestion to amend both. When you amend the federal return, you will be required to show what state the change in income is related to, my suggestion would be to identify it to the resident state.
If you do your returns yourself, i hope you will be able to go back in the software and make the changes, if you had used the services of an experienced accountant (CPA, EA or just an accountant) they should be able to follow through what I have indicated and may be able to add more value as hopefully they would know how to handle the non resident state and resident state.
In our multi state jurisdiction, VA MD AND DC, the income is taxes in the jurisdiction where you live. If the source of income is from a different state, such as w2 will identify it then you prepare a non resident return and claim credit in the state where you live for taxes paid in non resident state (within certain restrictions) so that there is no double taxation. If i am not mistaken, there is similar credit availability provisions.. if memory serves me correctly.
Hope this helps. if you need additional info, feel free to contact us directly.
manjit
Mr. Manjit Singh
Thanks for your response.
For the states, should we send any explanation/statement to support our application into their offshore program? OR just sending the amended returns with copies of federal amended returns will do?
Should we send a copy of the SDOP 14654 certification?
Will the state amendment also be for last 3 years, as we did through SDOP?
For the non-resident state amended returns, should we attach the federal amended returns?
Thanks a lot
Is there an email ID that I can reach you at? My situation :
– Have regularly filed taxes since 2004
– Started to file FBAR since June 2014
– Havent declared my income from India with a wrong understanding that the interests in India is already taxed
– For the tax year 2014, I have filed taxes. But I am planning to amend to include my India income (which amounts to 1000$ – Interests and dividends)
– Have always been a salaried employee (either in the US or India)
–
End of the day, why am I doing this? To have a good night’s sleep
My questions:
– What option should I choose to correct all my previous years tax returns? OVDI or OVDP?
– What will be approximate Tax attorney’s cost and overall time frame to complete this whole process?
Please help….
Hi, I have not reported interest received on my NRE account since 2012. Today I happened to listen some team mates about FBAR and need to report foreign investments. Can please anyone help find CPA for this? Manjit Can you provide your email id/contact information.
Have you already filed your income tax return for 2014? if not, file an extension.
then go back and amend you 2012 and 2013 tax returns. we can evaluate your situation, please, can we talk after april 17th.
my contact info is 703.280.5656, email msingh@mscpa.us. web is mscpa.us.
I’m in US since 2008 and I have not been reporting my income earned from interest or mutual funds as I was not aware of it. I was not aware of the requirements till I saw some video sent by my CPA recently. The maximum account balance what I had in these years have never crossed $70k. I’m unable to decide whether I should go for SDOP or OVDP. As there are several comments in the blog about the confusion between willful and non-willfulness. After reading the articles online even though I feel that I’m non-willful, I don’t know how the IRS agent would see my case. My CPA is suggesting me to go through the SDOP program as my balance is less. But, after reading all the articles online I’m still unable to decide as going to OVDP will be very expensive and will not fit in my budget. Please share your thoughts about my case.
RJ,
If you didn’t know about the requirement and it was non-willful, you need to certify that. Then it will be up to IRS to decide. I am sure you would have seen this but if not:
http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures
When you say “you need to certify it..” Do you mean to say prepare an affidavit to state that your intentions were not to evade taxes and it was your lack of knowledge….
Thanks
RJ my 2 cent worth go with SDOP and not ovdi your CPA is correct you wern’t hiding money. Plus my understanding is that if you have monies in millions and you arn’t citizen of any other country then the IRS will bite otherwise they won’t you are together with hundreds of thousands other who have made this mistake.
remember a few thing internet is a beautiful place to gain knowldge on the same hand you can become paranoid looking at some of the statement.
I would go with someone who will charge me as less money as possible in the end my fine was xxx thousand but i ended up paying 3000 to my lawyer and 2200 to accountant .The lawyer did noting he just billed me everytime i emailed him to ask the accountant to speed up things.
Actually i am looking at the bills.
Here is the breadown of some of the charges.
Havent heard from IRS about ovdi (filed initially through ovdi but changed to sdop)
emailed IRS billed 340$ to me
2) its been 3 months and the accountant still haven’t filed anything can you please let her know to expedite things
send email to accountant billed me 80$
Please be aware of these cost as well. You need a cpa who have filed this before not a blood suking lawyer
Thanks
Mo, Along the way, do you have any recommendation of cpa’s for streamlined? if you don’t mind sharing it here (Also those to stay away from!)
after you receive the signed 906 back from them how long does it take for them to bill you for back taxes, interest…?
Sorry Bob, don’t remember exactly, but they did send some bills for each year which actually was totaled 0 as I had sent the checked before.
Hello Manjit,
Any more feedback on how new (Non-Transition SDOP) are faring? You mentioned in your earlier post below that you are waiting on some insider feedback to submit others…
(And I am talking minnow case here. Total tax liability about 2.5K and max balance around 100K).
Appreciate your feedback.
One case from OVDP into stream line has been accepted without question. we stop short of submitting the 906 and requested for the switch. the agent was nice and did not question the ‘non willful’ certification. the amount involved close to 50k.
the second case transition into the sdop is getting resistance from the agent and quesitoning the non-wilful cretification. His position is what did he know, what research did he do. Though I talked to agent and told him that i have been doing the tax returns since 1995 as a student when simple 1040 ez and then 1040 with sch a etc. his question, did you ever ask him about his offshore accounts. you know what i told, i never dreamed about it way back in 1995 or 96. I never thought he had an account or when he opened the account etc.. any ways he wants more details etc.. that in my opinion is creating friction.
Also recently an attorney from chief counsel office Daniel Price on October 30, 2014 made some statements at a conference in San Diego (?) that the non wilful certification will be accepted. I have called another jr. attorney at the chief counsels office to get additional information but have not been successul in reaching atty. Daniel Price. Lets see.
Folks who read these blogs, please share your non wilful certifiation information. We all collectively can help each other.
PLEASE NOTE I HAVE I HAVE CHANGED MY EMAIL ADDRESS TO MAKE IT SIMPLE
manjit, is the guy who withdrew from the streamline program after submitting his 906 still waiting for signed copies of his 906? its seems they had a backlog because after they announxec the streamline procedure for a short time they placed the pre-july 906 on hold
talking about your post here:
Thanks Manjit. Have you till date submitted any NON-transition SDOP? (i.e. for folks who never got into in OVDI in the first place). In such cases, there won’t be an agent assigned, so it would be very different?.
Yes we have submitted couple of them. One got approved at 5% and the client had severe concerns and i must say he was very lucky. approved in less than 6 months.
Waiting on the second one. this one we expected but no result yet.
Hi Manjit,
For cases that are filed straight as SDOP, it is blackbox in that taxpayer does not interact with the agent, taxpayer does not receive a closing papers, tax payer is not told if IRS accepted the certification, etc
You said “Yes we have submitted couple of them. One got approved at 5% and the client had severe concerns and i must say he was very lucky.”
I think you are referring to your case that transitioned from OVDP to SDOP, right?
http://mopsicktaxlaw.blogspot.com/2014/06/the-new-streamlined-foreign-offshore.html
Sharing some good news. Just heard from my lawyer that the agent assigned to my case has confirmed after her review and having had her group manager and technical adviser review my case that they have agreed with the determination that mine was a case of non-willfulness. So my request for the transitional treatment was approved. i should be getting a closing agreement after their internal review and approval.
I’m sure everyone here will start hearing this news on their respective cases soon if not already.
Good luck
did you get a 906 form before applying for the lower penalty streamline procedure?
If yesm ,ay I ask when they sent you the first 906 form?
No, I hadn’t got that far yet. I had actually chosen the Opt out option so was in for a long wait, then the stream lined process became available so went for it.
how long did you take to hear from them after you sent your docs? i heard they had a major backlog
My lawyer sent the docs to request streamlined process mid August. She heard back from the IRS agent with a positive decision mid-November.
You are doing a great service by documenting your experiences. Would you be able to tell us how much you spent totally on all this? Attorney fees, penalties etc.
If I am interviewing for a job and the company does a background check, is there any adverse affect of them finding a pending OVDP case with the IRS? Does anyone know about this?
Thanks.
I don’t think OVDP would show up in the background check. My understanding is general background checks includes any criminal history / driving records, etc. and not IRS audits or etc.
Manjit / Others – Any update / insights on how NEW streamlined domestic cases are faring?
There are couple of agents that we have good working relationships with. When we have issue or ambiguity we call and ask them and try to get their feed back and rely on their ‘inside’ knowlege. The last conversation that took place was about 15 days ago with an agent who shall be identified as Mr. H. He had indicated that the IRS expects to churn out some of the SDOP in the coming weeks. So far no new news. Did not hear from any one yet. We have two on our desk ready to be turned in as soon as we see what the trend will be like.
Others.. please share your experiences as well. It will be very kind of you all.
manjit, if a taxpayer already in the OVDP program decided to pursue to the new streamline program, how much time would the IRS give him to transtion and submit his documents for the streamline program? Would they place his 906 on hold until they receive his documents?
In order to move out of ovdi or ovdp whatever they are using right now.. need to write a letter to the agent that you are dealing with. quickly declaring your intentions and withdrawing.
You can withdraw before the commissioner has signed off on the 906. If the commissioner has signed off. the deal is sealed.
when the new program came into effect, i had a client sent her 906 from india signed and submitted to IRS with a check for 34k. then the new SDOP came into effect. She sent the papers via email that she withdraws, luckily the agent we were dealing with was in fairfax, just about 10 miles from our office. I went to IRS office at 8.15 AM and submitted the withdrawl letter had the receptionist sign on the receipt and the time she received so that i could demonstrate when the letter of withdrawl was submitted in the event that we had to see who signed off first. We did not have to go to that extreme.
the agent put everything on hold once she had received the withdrawl letter.
We are still waiting for the conclusion as our client later now decided she didnot want to go through the SDOP but wanted to remain in the OVDP.
the jury is still out on her case. NO 906 from the commissioner for the past 1 month.
hope this helps.
hi manjit
they received my 906 in late march and and i’m still waiting for the final copy with their signatures, how long your client has been waiting for his final copy of 906? The one you said was interested in the stream line process but later withdrew, it seems like me he sent his 906 before the streamline procedure was announced
the agent called in june but i declined to transtiion over to the new streamline program the agent said in august the 906 is still pending closure nothing out of ordinary
thanks
its seems the OVDP processing really slowed down maybe even froze for at least a month or two(maybe even more) after the streamline program was announced to train their staff and give taxpapers time to transition to the streamline program, thats why its been taking too long to get 906s countersigned but now they have resumed processing. If you haven’t received any 906s for the last 4-5 months thats why, if things have been normal for your cases and you are getting them back in 2-3 months since the streamline program was announced then my info is wrong
hi Manjit.. i will be doing SDOP soon.. say it gets denied for some reason, what are our choices? i am on visa here.. can we do a wire transfer of the savings here to india and return back 2 india? will the IRS come after us? my 401K would still b here.. not sure how to transfer that.. my highest balance is around 190K
.. i consider myself borderline willfull/nonwillfull as i am sure most of the folks here are…. tax deficiency of around 6K and don’t mind paying 2-3 times that .. however in OVDP my net balance will be wiped off and that i can’t accept
please share your thoughts
Do not know the answer to your question.
Either it is wilfull or non wilfull. remember you are signing off under penalty of perjury. if you feel it is wilful. I highly recommend that you must seek the advice of an attorney, and must participate in the ODVP/I program and yes the penalty is 50%. that is very extreme.
Thanks for the reply Manjit.. if i go under OVDP too my balance will be wiped off .. can it get worse in SDOP?
in my eyes i am nonwillfull, however i am afraid if IRS will look at it the same way and they may try to impose blind wilfulness
Manjit,
I am not sure if you have see this? This is an interim IRM guideline on how an SDOP is to be proceeded. By & large a flowchart/cook book. (some parts are redacted though)
Click to access WI-21-0814-1244_Redacted%5B1%5D.pdf
Page 7 is where SDOP stuff started. Page 9, Paragraph 8 onwards is of great interest!. (Esp the IF-Then conditions)
Please share you insights after you analyze this. Thanks!
@joe it took 2 plus months for my pre clearence from what my attorney told me that their is a back log but don’t worry they will come through.
Hi,
I am looking for advise from folks that have completed the OCVP process.
My situation:
1) Got pre clearance for OVDP 2012.
2) Submitted deliquent FBAR’s and amended tax years for years that earned interest.
3) Received form 827 from IRS, signed and sent back.
4) Agent assigned and received form 4564 again asking to resend the dcoumentation (original and amended tax returns, india bank statements, copy of filed FBAR’s)
Is this normal procedure? I did the process so far through a CPA. Not sure if I should hire a Tax attorney now to complete the process.
Any help / advice is appreciated.
Thanks,
Sai
Jul 21 2014
need help/guidance
situation: immigrant became us citizen in 2001 or so
plight :did not know anything about FBAR, OVDP until my recent trip to india 2 weeks ago
current FBAR situation: Have 1 nro and multiple nre a/c with 4 diff banks since 2007. until 2012 failed to rpt income in us tax with the exception of citibank a/c that gave me 1099 int statements. since the amount was <10000$, ignored the FBAR. in 2007 sent post tax earned money to buy a flat and subsequently collecting rental income for which i have paid indian taxes without fail. did not realize that money would be taxed/reported in the US too (ignorance than willful behavior to hide/cheat anyone)
In 2012,2013 deposited 175000$ into FD so far the first maturity is 2 years and in 2014. was planning to report the FD interest after maturity and having repatriated it. reason for deposit was to help my parents with any medical treatment (father was diagnosed with cancer in 2012 and passed away in 2013 but did not use this money for any treatment like any other desi father) and for children college money. the money transfer in $ rate was 51Rs/dollar and hence a loss due to currency as well. thought with money lost in $conversion will offset any gains
only mistake was i used turbotax and checked no to FBAR a/cs over the years due to not knowing the rule completely.
Given the situation, can anyone based on their experience recommend a next step of attorney and ovdp vs streamlined for my case (establishing willful vs non willful) and any idea of what i'm looking at in terms of penalty? and good attorneys /their fee structure.
as you can see i'm trying to get compliant and seeking help with those that have similar situation and have gone through this. i intend to educate my friends with what i learn as well as a service to the community.
many thanks in advance.
Hello,
Anyone planning to enter SDOP soon? Procedure seems straight forward except for the last page on the certification where it asks for specfic reason(s). (In the same page, there is already a paragraph written for the tax payer to acknowledge he was negligent and non-willfull etc etc…).
Unclear what more explanations IRS wants. Anyone else looking into this, pl. chime in.
Just write the honest truth. Please note the letter needs to be ‘under penalty of perjury’ we had a client sent the document from india and did not include that sentence, it has come back to us and now we have requested that she re do the letter and provide it to us immediately. We had already signed and submitted the 906. Believe me I had to run to IRS office submit the certification along with letter to be considered in the SDOP instead of the VDPI and the IRS agent manager called us and had let us know that the file has been pulled and submitted to the committee for review.
Just curious, what this 906 you are referring to in the context of SDOP? Was it a transition OVDI to SDOP Case?
Looks like if one is using the Certification PDF provided, page 6 already has the necessary ready-made sentences around the perjury clause…
hi Manjit Singh,
do you have any feedback on SDOP? are results out on SDOP filing?
regards
Not much.. in July the agents working said ‘we are in training on the new procedure’. Recently on one case that was converted from full ovdi to streamlined procedure.. the agent sent us a letter format to request for the payment made for the penalty paid prior to the acceptance of the 906 by the commissioner. In the send similar case the agent said send in the form 843 request for refund. as i notice from the two different agents same objective (refund of money_ two different way to get the money back.
Just curious, has there been any suicide cases related to FBAR? In my eyes, I am non-willfull. it may be a grey area.. however if it doesn’t work out with SDOP, not sure what to do
Hi manjit – what’s the worst case scenario in case one gets denied on SDOP? Can the penalty in reality exceed the highest balance in the account? I am talking about a minnow here .. balance around 100K.. tax deficiency around 5K
I did read somewhere a while ago that the IRS cast a net intending to catch whales and sharks and ended up with a large number of minnows and guppies! That apart, the answer to your question is “yes” although I cannot imagine that an agent would recommend so extreme a penalty for you! Here is a link to a very good article that came out in Forbes some time back. It should help you feel a little better and optimistic about not being penalized to the extreme…..
http://www.forbes.com/sites/irswatch/2014/07/07/irs-ovdp-vs-streamlined-what-to-do/
Thanks Manjit..
in the SDOP letter, is it required to use legal language or can we just use layman terms?
Layman language is fine.
it should not take more than 30 days.
@manjit do you know how long Pre Clearence is taking now a days i will be joining Streamline process but its been 53 days since a letter was faxed and no response yet a little bit worried now.
The last one we submitted was in first week of May 2014 and the approval came in early June. Please understand that is insignificant. If you want to move into the streamline process please go ahead and send in your certification. You do not need to wait for the approval of the pre-clearance.
@Manjit its 53 days my lawyer will call today i just hope i am not under any audit.
@manjit we got a call from from IRS CI they said it was still under process and that someone will call us back its been 2 months now and no response yet.
Anyone else had the same issue?
what step of progress are you at> pre clearance or the next step of providing the bank information etc — the four to six page disclosure…It is kind of unusual to take this long, but then things keep changing as no one knows how to handle situation since june 18th. whenever our office has called. we have heard IRS agents are in training. we are being given new guidelines… things are pretty fluid.
Manjit it’s still in pre clearance the first step. We got a call back saying that it’s still in process nothing yet
Do not know what to say.
mo, did you finally recieve a response regarding your pre-clearnace? maybe they have placed a hold on everything, its been over 5 months since I mailed them my closing agreement and still have not received a reply
After you signed and mailed the closing agreement to the IRS, how long did it
take to receive the fully executed closing agreement back w/ the agents signature??
Can it take more than 3 months?
Unless they have improved on the timings…mine took like 3 months.
For me also they said it will take 3 months but I got in 6 to 7 weeks
Do attorney and client both receive three copies of the 906 to be signed and returned to the agent?
@MO
Not sure what you mean by intake.. pre clearance that is taking 40 days or the information submitted post pre clearance.
The CI officer we talked to today has indicated that we could send in a fax or a letter requesting that the account be put on hold as we are going through the stream lined process.
Your attorney will be able give you better advice since he knows your case in depth.
@ Manjit i am also taking about pre clearence which now is taking 40 days. After the pre clearence is approved you will send an intake letter (Faq 24) this is where you will once again provide client’s info along with where his bank is and account information etc
I spoke to my lawyer i will talk to him on Monday again.
My question is what if the pre clearence is approved can we still send the letter or would that be too late.
Per Faq 3 of Transition
A taxpayer will not be considered to be currently participating in OVDP for purposes of receiving transitional treatment unless, as of July 1, 2014, he has mailed to IRS Criminal Investigation his voluntary disclosure letter and attachments as described in OVDP FAQ 24. Thus, a taxpayer who makes an offshore voluntary disclosure as outlined in FAQ 24 on or after July 1, 2014 will not be eligible for transitional treatment under OVDP, even though he may have made a request for OVDP pre-clearance before July 1, 2014.
manjit,
In 2 weeks it will be 6 months since I mailed the closing agreement form 906, I haven’t recieved the final copy with their signatures, have you seen it take this long? Maybe the OVD changes announced in June put a hold on processing of cases.
thanks
@Manjit, i spoke with my lawyer and i was told if an intake letter and attachments were not send to the IRS then it should be as simple as filing Domestic Streaming .
In my case only fax document were send. I will meet him again on Monday or Tuesday. Please let me know if you have the same info
thanks
What does this new process mean for some one who has closing agreement. In my case I have closing agreement but I would have been eligible for this program If it was there at that time.
I paid 12.5 percent so if we can get 5% that would be great.
Thanks in advance
Krishna
Krishna,
From what it says here, if you haven’t signed the closing agreement you might be able to use this new process.
Check with your attorney/cpa(if you had any) or can talk to IRS directly.
Thanks much.
I did sign my closing agreement ( signed by IRS) so we just do not have any options unless they give some relief
Thanks
Please call the agent immediately, send her a fax that you would like to be or electing to be in the streamlined domestc offshore procedure. If the document is not yet signed, you could be into the program. I would also send an overnight package of the copy of the confirmation of the fax receipt just to document. i hope it works.
I signed and IRS signed in March of this year, I will check with them if there would be any relief.
Thanks
Krishna,
From their instructions, I doubt there’s going to be any relief for those who has already signed the 906s.
May be if someone sues IRS or take some other legal action there can be some change…
@desiway
I read that far however I have only initiated ore clearance with Ci and nothing else so I was wondering if I can just move to streamline process?
@somenri
the 5% is on total balance. Lets say you have 5 accounts 5k in each account the 5% would be on 25k
If you start reading different blogs lawyers will confuse you. They are like vultures and now with streamlining process they have become irrelevent. Cpas will do just fine.
its simple you either evaded taxes not avoided but evaded them by shifting money to foreign accounts or you didnt. I dont think you did. You are just paranoid like myself
@Manjit sorry here is the faq
http://www.irs.gov/Individuals/International-Taxpayers/Transition-Rules-Frequently-Asked-Questions-FAQs
Question on filling up FBar form. Each NRE FD’s in my India bank has it’s own account #. Should these be listed separately or lumped up and reported as one under the umbrella of NRE savings account #?
Good news for non-willful FBAR violators
You need to pay only 5% penalty and not 27.5% if you are in USA and 0% if you are a non-resident
Read this latest news dated 18 June 2014.
http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures
Just wondering what if you are in IRS CI Pre Clearence how do one get into the streamline process?
Attempting to find the information. ALready left a message with the Criminal Investigation to find out the process and waiting to hear back with reference to the request to move into the revised streamlined process.
mo,
As mentioned in the last paragraph[http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures] it looks like for anyone who hasn’t yet signed the closing agreement, will have need to follow the streamline certify procedure.
Thanks for sharing Raviraj…
@Manjit would appreciate an answer. The irs faq is not that clear although it does state that one can transition. I wonder how the transition process would be hopefully we do not have to file under OVDP opt out and then join streamline process.
Would be a shame to go through all this hassle
That is the specific question that we have raised with the CI department and the IRS/ Waiting for the response from them to further guide and plan our strategies. I do not want to put any comment or try to speculate on it. I will be studying the process again tonight.
@Manjit Here is the transition Faq. Look at item 3 # seems to me one can go from Pre clearence to streamline as long as documents have not been filed.
Atleast thats how it seems to me ..
I haven’t read it all yet. But 2 questions.
1. Is the 5% penalty applicable to like each year or each account? I hope not.
2. How do they determine non-willfulness seems to be the key aspect/grey area? And in case they decide willful then an applicant will be in deep trouble.
Can the mere fact that one wrongly/unknowingly selected “No” for the foreign account question when doing their tax returns make them willful?
I would think that most of us here didn’t know that “US taxes global income” till recently. (and that it is one of the only two countries in the world that want to tax global income. All I am saying is that was news to me. (Not debating the right/wrong aspect)
somenri,
It has to be one year highest aggregate balance as mentioned here otherwise say I have $20k balance for 5 years not reported, I would end up paying 5K[25%] in penalty as opposed to 12.5% if I would go with OVDP:
somenri,
This is what IRS has to say for “quiet disclosures”:
I have not done anything yet, just happened know about all this mess now. Is June 30th is the last date? PLEASE HELP….Where to start? Desiways, PLEASE send me your Lawyer’s contact info.
Jimm,
If you have to file FBAR for tax year 2013, then I would suggest you can go ahead and file that before June 30. Because if you don’t and then go for the streamline compliance, 2013 will be counted as well. May be you need to amend the tax returns for 2013 as well. But again it’s better to get professional advice.
Jimm,
In a very similar situation as you are. I learned about all this mess earlier this yr in march. I filed a tax extension (paid projected tax) for 2013 to buy time & figure out. But fbar there is no extension. I don’t want to miss yet another fbar… So I plan to do everything right for 2013 and then figure out the new streamlined procedure & address the past 3 or so years.
My only concern is if I do everything right for 2013, and that itself triggers an audit immediately for past years, will I STILL be eligible to participate in this new streamlined procedure? I am hoping I can be in a worse of state by doing the right thing for 2013.
If you determine something, pl. reply back. Thx!
@SomeNRI
You did a smart thing by extending your 2013 returns. Your sequence of steps should be:
1. File your 2013 FBAR before June 30th. Don’t worry if it will trigger an audit. The risk of not filing is greater than filing
2. If you are very confident that you are non-willful, choose the streamlined process and get in line as soon as you can. If you believe, you have some serious tax violations that may trigger criminal charges, choose the OVDP gate.
3. Don’t forget to amend your state tax returns after your file your OVDP or streamline
4. As the last step, file your 2013 returns and the state returns before Oct 15th.
Good luck
For taxpayers who are completing Schedule B, where does it say that you have to report your worldwide interest/dividend income? Of course, now I know one has to, but was wondering how I could have missed reading the instructions to report worldwide interest/dividend income, just like thousands of other US citizens who may have to face the misery of OVDP.
Yes very true. Eagerly awaiting the next phase. Readers do you think it is going to be retroactive.
I am not sure if the readers are aware of the US vs Zwerner, 13 22082 US District, Southern District of Florida. The case was heard in mid May 2014 with a Jury present. The jury returned a verdict of 2.2 million dollars, penalty on May 19, 2014. The judge had the final say in it. The attorneys for Zwerner had questioned the applicability of the 8th amendment of the US Constitution, which summarizes that the penalty/punishment should be commensurate with the crime. Is a three fold penalty reasonable for a balance of $1.49 and the offshore penalty of $2.4million dollars? The judge was supposed to render his opinion on the constitutionality of this huge penalty on June 6, 2014(past friday). Guess what folks, in a status meeting between the two side attorneys and the judge, the motion was entered that a settlement had been reached. Which means that the judge did not get to decide the constitutionality of the amount of the penalty. DO you guys see the shrewdness of the IRS> they settled before the judge could render his opinion. This settlement is behind closed doors. Right now there is no information available on the terms of the settlement. Do you think it will be available. DOn’t bet on it.
Manjit, Where is your contact information? I’d like to have an initial consult & understand my options for compliance and what it would entail. Thx.
manjit singh cpa 703.280.5656
Kusum Ramachandran EA 703.280.5656 x 27
manjitsinghcpa.com
Thanks. How does client-confidentially work with you as a cpa as opposed to a tax-attorney? I am asking from a legal standpoint. I understand that there has to be is implicit mutual trust etc. (To ask the same question differently: From legal standpoint what additional confidentially protection does one have by going to tax attorney as opposed to a cpa?)
Please re read my earlier post in these blogs.
Just remember. with an attorney your conversation correspondence is privileged. It cannot be ordered in a court of law.
Your conversation with a CPA can be ordered in a court of law.
Ethically CPAs and Attorneys are bound by client confidentiality. The trust in a CPA is primarily due to this ethical bounds. There are attorneys who may violate this, there may be CPAs who violate these ethics. Our success in this community since 1991 when I started my practice full time speaks for itself. other than that I can not give you any other assurances.
regards. .
I came across this. Would be great is this happens.
http://www.williamscoulson.com/news-and-events/legal-updates/irs-commissioner-changes-expected-to-the-offshore-voluntary-disc/
Might be a good idea to send feedback to the tax advocate service about pains faced by innocent folks.
Thanks for sharing the information.
This came out today
http://bigstory.ap.org/article/77000-foreign-banks-share-tax-info-irs
I opted out under OVDI 2011 and finally have a settlement with IRS. I am happy I decided to withdraw from OVDI. I am really thankful to others who helped me through detailed information about their case. Here is a summary of my case. I will add more details as I find time. My case has unique details about India NRO accounts etc that was not found else where
http://ovdioptingout.blogspot.com
Dear OVDI
Would you kindly share the name of the attorney who walked you through the opt out process, so that we can guide our other clients who need help.
The attorneys that we dealt with in one situation should that in reality it was not going to work out in the taxpayers benefit.
Would you kindly shed light on the following question:
1. When you sent the OPT out letter, was your agent changed> I have been told by two different people that the agent remains the same.
2. The year that you had made an error in the computation of cost basis due to the currency rate differential, at the time of filing the amended returns, is that when you realized you had over paid or you first paid additional amount and then later on you found that the cost was higher and you had over reported your gain. the reason I ask this is: the rule reads – the statute of limitation (SOL) on refunds is three years from the date the return is due and/or two years from the date the tax is paid. I am wondering had you paid the tax first, and then re did the amended return, would the IRS at that point in time denied you the refund due to change in the cost basis. Just an academical question. SInce this would have meant filing two amended returns, and I do recognize it has some implication.
Thanks for your blog it is informational and would guide a lot of individuals. I have one situation where the individual has filed some FBARs but not all and one year or two did not report the income. I am thinking of putting him into the OVDI and then at the penalty phase pull him out with the guidance of the attorney to protect him.
thanks and regards manjit
in one of the responses in this blog I have thought of advising several people of opt- outs, I have also commented that one of our very fist case was a gentleman who was over 85 to 90 years old. An attorney I consulted had indicated that the IRS may not prosecute such an old individual for fear of bad publicity. FOLKS> i would like to bring to your attention that a Jury in FLORIDA has sided with the INTERNAL REVENUE SERVICE and agreeing with a 150% FBAR penalty. I AM SHOCKED. THE GUY was 87 YEARS old. May the amount of money overseas was too high to ignore and the IRS needed a ‘poster boy’ for their program. Review the case here.
http://www.forbes.com/sites/irswatch/2014/05/29/zwerner-jury-determines-150-fbar-penalty-applies-what-next/ ( i am an accountant did not know how to provide you guys with a hyperlink)
As you will see the Judge has set a date of June 6, 2014 to comment on the legal and constitutionality of the penalty, and i reproduce the questionable part for emphasis. purposes.
.
‘The Excessive Fines Clause of the Eighth Amendment and relevant Supreme Court case law support a conclusion to the effect that a civil penalty or forfeiture is unconstitutional if the penalty or forfeiture is at least in part “punishment” and such punishment is grossly disproportionate to the conduct which the penalty is designed to punish. The touchstone of the constitutional inquiry under the Excessive Fines Clause is the principle of proportionality
– the amount of the penalty must bear some relationship to the gravity of the offense that it is designed to punish.’
In my personal opinion, and remember I am not an attorney, if the judge agrees that it is unconstitutional, it would be a small victory for the taxpayers, Reading this situation has made me change my way of thinking.
I also noted today that in this blog page by desi ways, there is another gentleman taxlitigator who has referenced this case in the past and has added comments to reflect the above jury verdict
Manjit i think i rushed into the ovdi program simply because i can be anxious after joining the program i realized my mistake a mistake worth 60k if i can do it again i would have simply amended previous returns and filed my taxes,to begin with i wasn’t trying to evade taxes i just didnt knew that if i had a foriegn bank account i had to check schedule c.
Note all article i see where people have been fined or send to prision are people who actually A) were trying to evade taxes
B) Had million dollar plus accounts.
Guys i just entered the Pre clearence process with ovdi and having second thoughts can i get out of it now. its been 2 weeks since i just want to file quietely.
can anyone help?
Mo, it’s too late now. You are already on their radar. If you don’t proceed with your OVDI filing, you are at much higher risk now. I went through the same exact thing and I was advised by my CPA to go through the process.
Nitin i would agree with you at this point. I just didnt even see anything and filed hurridly and it seems like i am in for 50-60k
Mo and Nitin, just curious – if you are just inadvertantly out of compliance, why are you not looking at the opt out option? 50-60k is a large sum.
Nitin: There is a FAQ that addresses the issue of a opt out and take your chances. Please remember this OVDP or OVDI was a civil issue as an ‘amnesty’ from criminal issue. Opt out will put you into the fray of income tax regime, where in after a few legal steps and the liability becomes statutory and the IRS can go a levy your bank account and put a lien on your property. In the civil and criminal situation the IRS has to go to court win a judgment and then the liability becomes confirmed after walking through all the legal doors. Please do not forget the severe FBAR penalties. To collect that as well the IRS has to go through the legal court system. Not just pick you up and throw you in jail. That is the reason why if you opt out you should have the umbrella protection of an attorney instead of a CPA. In this situation who knows you might come across an lenient judge who might side with you. You have the right to represent yourself as well. You have the ability to present your ‘reasonable cause’ not ‘willful omission’ arguments etc. and win the judge’s sympathy. I was representing a 85 year old man, but he chose to terminate me and go to an attorney. He still ended up paying with the attorney plus the attorney fee. Another attorney who had worked for the justice department had indicated to me that the Justice Department may not have wanted the bad publicity that would have come by prosecuting an 85 year old man. Who knows waht the outcome would have been. What matters most is what is the PRICE of a peace of mind assurance. That my friend is the OVDP/OVDI program, in my view point. I can guide people seek advice to the water, i can not force them to drink it. It is their choice. If they feel lucky take the chance – not report- or do silent disclosure. I as a CPA am bound by Circular 230 rules of the IRS to guide my clients to do the right thing. if the client refuses it, believe it or not i am required by ethics to dis engage and i did have to tell 5 or 6 clients in 2012 and a few more in 2013 that knowing what i know, i would not like to prepare their returns. Do i have any regrets. not really just for a few dollars of income. if the shit hits the ceiling. i will not be anywhere close to it. And I sleep very well knowing this.
Thanks NItiin i am just so pissed for getting into ovdi, it wasn’t necessary in my case but i did i should have just did a go forward filing instead of spending 10k on attorney and cpa and another 40 or so in ovdi penalty.
Oh well live and learn
Mo, I just reread your post. Did you say it’s been two weeks since you filed for pre-clearance? Are you sure you meant pre-clearance and not clearance? Pre-clearance takes 24 hours – if you send it by FAX.
I was told by the attorney it was pre clearence and i was told that as soon as they get a confirmation they will fax it to me. Its been 2 weeks now and nothing yet they said it takes 30-45 days for Pre clearance
I was wondering if i can just stop now and quietly file
FYI:
You can read FAQ#23, 24 under OVDI Process: http://www.irs.gov/Businesses/International-Businesses/2011-Offshore-Voluntary-Disclosure-Initiative-Frequently-Asked-Questions-and-Answers
Here’s the basic process: http://www.irs.gov/uac/How-to-Make-an-Offshore-Voluntary-Disclosure
Nitin: About 10 days ago we faxed in a pre- clearance request. DId not hear anything back so we called the IRS CID division in Philadelphia and were advised that now they are taking 30 to 40 days to do a pre clearance.
I read a discussion about reporting a foreign real estate asset and Manjit Singh mentioned that it becomes reportable (and included in penalty calculations), but ONLY if it is income producing, not otherwise. Correct? That’s what the FAQ states….if my interpretation is correct. Thank you!
Guys i just filed for Pre clearance for ovdp i am wondering if this would have any effect on my 485 and 140 application?
I mean the ovdi process it seems like they are not in sync but wondering……
Nope…though not sure what happens if someone is found guilty on criminal charges…which I highly doubt anyone reading this blog is.
We arn’t criminals we made mistake and now paying the price because we get scared and want to do the right thing.
Even if we would have filed Quitely which i am kicking myself for not doing their woudn’t have been any criminal charges. I might have to fork 50k or so for 300$ i am just kicking myself..
Should have filed Quitely.
Oh well
I understand, as Initially, I did say earlier in my posts and comments that I wasn’t sure if going through OVDP was a good choice I made.
Even though I am done with it sometimes I do think, if it was a right choice or not. Obviously, for me the money involved was comparatively less and so easy for me go bite the bullet. I believe a Satyagrah movement against this crapy tax rule is what can bring this issue on top and getting attention…
@krishna:
A contract is when both parties sign and there is clear understanding of the terms and conditions and consideration has been exchanged.
I do not think you will get anywhere. It is an agreement signed, sealed and delivered.
Today June 23rd, 2014 at 8.34 AM i went and delivered a letter to an IRS agent working on one of our client’s case where the 906 has been signed and sent to the IRS office for the commissioners signature. The check payment for the penalty in the amount of @24K has been given and cashed by the IRS already. We do not have the 906 signed back from the commissioner yet. the objective here was to have it documented when the letter of withdrawal was submitted and wait to see when the commissioner signs off on the 906.
I will take a position that the commissioner signed off AFTER i have submitted the withdrawal. I would have a case otherwise, if the commissioner signed off last week, my heart bleeds for the client as her request was beyond the time frame. I did my best to withdraw it. I will see what the outcome is.
I have left a message at the CHIEF COUSEL office in washington DC for an explaination. Remember the chief cousel gives legal advice to the Commissioner of the internal revenue service. I felt he would be the best person to tell me the legality of the time of the signatures.
Please keep us informed.
I participated in OVDI in 2011 and my case was closed a year later. However, last month I got a letter from my state demanding their “fair” share. Apparently, if you amend your federal return to comply with OVDI, you HAVE to do the same with your state return as well. Nobody mentions that here!
Nitin,
That’s true, you do need to amend the State returns as well. My attorney told that to me when he explained the entire process in the very beginning. If you see my case time-line above, after everything was settled with IRS, my attorney prepared the State Returns and asked me to sign and send the checks myself. My checks were cleared but haven’t received anything from State so far. So think all is well.
I am sorry Nitin to disagree with you. Please re read the posts that are mentions that the state needs to be amended as well. There are mentions that some participants attorneys have waited till the OVDI is completed and then suggested to amend the state returns. In my case, any and all cases we have done, we have prepared the amended federal returns and at the same time prepared the state returns, in our case, virginia. We have made them file it simultaneously as Vriginia has a stricter and tougher penalty rates than other states. While typing i noticed my post of march 25, 2014 at 4.55pm Feel free to review it.
Yep, even a mention of it in one of my very first posts on OVDP: https://desiways.wordpress.com/2012/02/08/foreign-bank-accounts-reporting-fbar-and-interest-earned-in-nre-accounts/
I guess my CPA and I both overlooked, it sounds like. Thank you for clarifying.
I came to the US many years ago and have 4 accounts. 3 of those have less than $10K each, and 2 of those were jointly owned (for convenience) by me and my brother in India, and 1 by my wife and her brother. All of these were inherited funds and these accounts were used for shopping (may have been more than $1000) in each visit when we visited India 3 times in the last 8 years. Besides these 3 accounts, about $140K was in demat shares (all inherited after my parents passed away more than 8 years ago. The demat share account has not had any activity at all in the last 10 years.
Under the above circumstances, does anyone know if the IRS will charge the 5% penalty for the demat account and 27.5% for the rest? I have not paid any taxes or interest on Indian income (simply because I was ignorant), and did not file any FBARs, and that is why I am leaning towards filing an OVDP.
When you spoke initially with the attorneys (before selecting one), did you give then your full name and tel#? Of course, I realize I need to give them details about my situation, but I would prefer to provide as little personal info as possible.
@Andy,
Yes, you will at least give your phone number, if you make an appointment and some Name, just for sake of conversation. I think I just used short-form of my name, don’t recall if I ever gave anyone my full name. You can use GoogleVoice number in case you don’t want to give real phone number.
Anyone that calls me on the phone, i would give them the right answers and try to guide them the right way. whether they come to me or not, there is a wide choice. If your fear is to be open with the attorney or CPA with your full honest and complete detail, do not expect an accurate analysis of your situation. This whole process is based upon full trust. if there is no trust, you should not be calling around. Another point that you need to be aware of is confidentiality. No CPA will go and spill the beans on you. No Attorney will go and spill the beans on their. The ability of a CPA and Attorney to instill a level of confidence of confidentiality is the cornerstone of their profession. That is what this office here believes in.
desi after the consent you just sent the Amended Tax 1040x return not the original correct?
Thanks
@junoon1234,
I think just the Amended though I can’t be sure if my attorney submitted the originals or not. Though to me it doesn’t make sense submitting the old one, which IRS should already have it in their system.
just wondering i am about to join the OVDP program and it seems like since i was working on 1099 i claimed some business expense. Is this something they can check or i shouldn’t be worry about that?
Thanks
I have to ask is their anyone who quietly disclosed and was audited?
thanks
Hey Folks, OVDI seem to complex and target for criminals.
I had 2 questions.
1. Has anyone (or anyone they) know simply started reporting (interest & fbar) prospectively from the current year on? (without trying try to amend the past)
2. Also do you know of any anyone who was audited, when the first started reporting foreign interest/fbar. (I am not talk those hiding millions, but benign cases say with say $1K nre interest missed for the last 2 years due to ignorance).
Their are plenty of other accountants and competent cpas. This is really cheap i think it might cost me around 8k or so.
Make sure you find a competant cpa or so. You won’t find anything cheaper then what’s offered
Take it
Thanks a lot to Desiways for taking the time to share his experience. It is really helpful.
The intention of IRS is to catch those big whales who intentionally hide their assets to evade tax. Unfortunately the unintended side effect is that many innocent lives who never intended to commit any tax evasion have been caught unaware with huge penalties. Most of them appear to be from the new immigrant community who did not have the right timely knowledge about the complex and complicated US tax code.
I suggest that the victims of the highly unreasonable FBAR / OVDP penalties, that includes me, should form an online community in the name of OVDPvictims.org and start a movement to correct this systemic problem that is ruining the lives of hundreds and thousands of innocent people.
I need help from people who have experience in starting a blog / online communities.
If any of you here are interested to join hands with me, please send me an email to
RaviRaj5@hotmail.com
Have considered simply filing things the right way from this year on rather than dig or amend the past?
Thanks Manjit. When I looked into this, it appears they want people to report even accrued interest in the year that has not yet been paid out (because the FD is active). That appears strange. Your thoughts?
https://ttlc.intuit.com/questions/1892156-how-to-report-interest-income-on-multi-year-cds
Couple of things here. Does the indian bank do tds on the accrued interest. if it does not then i would take a position of not including it as the American TAX System is based on cash. If you received cash it is income.
What is your basis of such an conclusion.
In my mind a FD is the amount is fixed and will remain fixed till the day of maturity when you will receive the interest. once received you have the rights on it, you can spend anyways you can.
If the interest is accrued, is the FD amount is changing with the amount of interes. is it increasing with the interest. If so that means you received the cash ot accrued. Hence then i will agree that it will be includable in income, otherwise i will disagree.
Desiways the only issue here is that these lawyers some of them i called are pushing into going through the OVDI route. In my case its a few hundred dollars in interest every year for the past 6 years and the only reason i didnt file is because i didnt know that i had too.
I finally called a few more accountant who believe that i should just amend and file Fbar.
The Fbar calculation in my case are a night mare.
Hopefully things will be ok once i file
Please don’t try to save a 1000$ here or their just get a good accountant
I had a question regarding NRE Fixed deposits that are on 5 to 10 year terms and NOT matured. These don’t pay cash interest till they mature or you break them. So when calculating interest, I assume there is no interest income to report from such multi year FD’s that are active? Am I right?
From income tax reporting purposes your interpretation is correct. Please pay heed to the point that it needs to be calendar year 2013. Also be careful for the total amount in the CD from the FBAR filing requirements.. If the amount was any time during the year greater than 10k, you are liable to file the FEN114 (old TDF90-22.1) and it needs to be online through BSA website before june 30, 2014.
Thanks Desiways & everyone. Really informative.
Questions below. Apologies if it was already answered, could not find it.
1. Do we need to report interest from foreign accounts (Savings, NRE, NRO) even if its really low? like for US accounts its $10USD. Is there a minimum interest limit/criteria?
2. Also, I read somewhere on the IRS site, the penalty could be just 5% and may not be 12.5% or 27.5% if the interest amount is not that high. For example, the highest was Rs. 7,500 in 2012 and the lowest is Rs. 1,500 back in 2005 (last 8 years)
3. Never had to file FBAR since the balance never went over $10K in USD. But wondering if I have to file an OVDP to fix this mess. I have never reported interest from foreign accounts as the interest amount was never high.
I called an IRS attorney to get some suggestions, but he needs me to formally hire him :(.
Thanks in advance guys for your response.
Tax Q: If the amount is very low, why the hesitation to report. Convert the foreign currency to US dollar, how significant will your tax liability go up. Please remember you are required to report your world wide income. In US whether you receive a 1099 or not, the reporting responsibilty is yours, even if there is no 1099.. Second if you are in the OVDI program, one of the things you are promising is the complete accurate and truthful. To answer your first question. No there is no minimum limit criteria. It is your honesty and integrity.
Yes there is a 5% penalty bracket. Please review the FAQs again under which circumstances that 5% is applicable. It is very limited and very strict conditions. Please trust me the IRS will ask for each and every document to be sure that you do qualify for the 5% penalty, otherwise everyone would have claimed that penalty. The due diligence done by CPA or Attorney would also make sure you qualify. In response to your question as what the amounts are in the bank, Please not the emphasis is ‘what was highest balance in the account. You pick that year out of the 8 years and calculate the penalty. Hopefully this addresses your second question.
You did not report the interest on the foreign bank account because it was never high. THe issue is were you income tax reporting compliant? No. you did not include the interest income on your tax return. Next. Did you have signature authority over a foreign bank account. the answer is Yes. You did not report that at the bottom of schedule B of your income tax return. Was the account over 10K, were you liabliable to file FBAR. You did not respond to that question because you were of the idea that the amount is insignificant.
As i have said in my earlier posts, this is a very bad law, but unfortunately we have to abide by it till we all voting individuals gather enough votes and ask for representative in Congress to overturn the law. Or someone has enough courage to take this to court/supreme court and have it analyzed as fair or unfair. Till then we have to comply with it.
regards
Thanks Manjit! Let me put it this way. I never realized I had to report the interest on the foreign bank account since it was never high (balance over $10K USD), it was just unawareness on my part that irrespective of the amount I need to report and its not that I was hesitant about higher tax liability. I recently learnt/heard that one of my friend’s cousin ended up spending over 100K to clear things up & that’s when I realized!!! As far as FBAR, the balance never went over $10K, so am fine there. I guess I will have to hire an IRS attorney to be on the safer side and would be lucky if am eligible for the 5% penalty.
Desiways i just spoke to an attorney and what i found is ridiculous it seems like i will be paying 12-15k just for fees and another 10-40000 on penalties my new attorney has informed me to go the OPT Out way and not the 27.5% rate.He said that their is a good chance this might work favorably in your case
Did you ever looked into the Opt out way? Rather then paying 27.5%?
Thanks
No I didn’t look into opt-out. Yes, but depending on the situation, sometimes opt-out might end up into a better deal but only a tax professional can tell you based on the overall analysis of your case and his experience with such cases.
Is there anyone on this forum who has actually opted out.
In my circles – acquaintances and others- no body is coming out and admitting to the fact that they opted out. I can tell you from my client base none chose to opt out.One individual consulted an attorney and they chose to continue with the process instead of opting out.
Desiways my question to you it seems like i am in the same boat and haven’t paid bank interest in the amount of 1300$ for 3 years do i also have to file OVDI? I have close to 80K in my account and to pay 27.5% seems to be a lot on interest not paid on 1300$?
Can you please advice?
Thanks
Mo Alam,
I know it is really a ridiculous penalty though I cannot advice you on what to do as I am not a tax professional. I was once in same situation and I have reported my dilemma here, if you haven’t checked it: https://desiways.wordpress.com/2012/02/08/foreign-bank-accounts-reporting-fbar-and-interest-earned-in-nre-accounts/
Hope it helps you.
MoAlam,
I recently found out about all this and my case very similar to yours. Is there a way we can connect outside this forum? Looking forward to to discuss. So far I have talked to 2 CPAs…
Sure email me at aatish231@yahoo.com
@someNRI,
whats the latest in your case? I am look for some advice as well. My case seems similar to yours.
K, My questions is that i have read a lot of reports where people with minor deficiency are filing without OVDI.
I have money in the amount of 100k however past 3 years interest combined is around 1000$. I am just wondering should i go with OVDI it seems ridiculous to pay 27.5$ for not paying 300$?
Any response would be appreciated.
Thanks
Mo: If you read the FAQs which the IRS posted and treats it as the written law, you will notice that they have indicated that they intend to pursue those people who do a ‘silent disclosure’ and I think that is what you are referencing to. I would like you to consider that paying the income tax liabilities, interest and penalties associated with the under reporting of this income does not provide you with the protection of the participating in the OVDI program. Participating in the OVDI program affords you some level of ‘peace of mind’ from prosecution in the future if the information became available to the US treasury. To be honest with you I feel the pain of all the individuals who have paid the OVDI/FBAR penalties. This is a very bad law and the citizens (people who have the rights to vote) should approach their elected officials and pressure them to change it, if possible.
Believe it or not, during this tax season, we have had three individuals come forward and have requested for assistance in becoming income tax compliant and participate in the OVDI program, even now when the pressure is not there anymore.
Wish you all the best.
Got my Form 906 and the penalty is as expected. I will pay it but wanted to know who and all should sign and whether it needs to be attested.
I know the taxpayer and spouse should sign but is there an attestation that is required and also the representative signature is required.
Thanks for your replies in advance.
If you were represented by attorney or CPA, you both should have received three copies of the 906 to be signed and returned to the agent.
If married, both husband and wife shall sign and the POA will sign all three copies and return. Thereafter, the representative for the commissioner will sign and return a copy for your records as signed sealed and done deal.
Thanks Manjit.
Is the POA sign required?
Thanks
Krishna
manjit,
So the attorney witll recieve 3 copies of 906. The client will also recieve 3 copies of 906 and after he signs them he should mail them to the IRS, correct? The attorney also has to sign the 3 copies he received and mail them. The client and the attorney can do this and mail the 906 forms they received separately, am I correct about all this?
Thank you
Krishna, have you recieved the Closing agreement signed by IRS?? i thought it takes less than 3 months
I received my signed Form 906 last week. It took roughly 2 to 2.5 months from me sending it to IRS.
Thanks
Krishna
Krishna, after you signed form 906 did you mail it to the IRS or to your CPA/attorney?
thank you
I mailed it to the IRS myself using certified mail I think…
Thanks
also, when they ask for bank statements how many days do they usually give you to respond? i know you can ask for an extension
thanks, do they usually send a letter then follow-up with the phone call to attorney/cpa to ask some questions and then send form 906 if all is ok?
Does the IRS mail the closing agreement to the taxpayer or to his attorney or CPA? I understand the taxpayer has 31 days to sign it
Albert,
In my case, I received the 906 forms and the time was 14 days to reply. Though the attorney said he can ask the extension if needed.
Question on how penalties are calculated. My Attorney’s office has recalculated my penalties and they have come up with a lower amount than the one I was initially anticipating. Their logic is that in case of a Fixed Deposit that matures and is reinvested, the amounts should be counted once even if the reinvested account number is different than the original account number. They are saying that IRS allows for the amounts to not be double counted due to transfers and reinvestment from account to account. Does anyone know if that is accurate? I can’t find evidence of this specifically in the IRS FAQs.
Kalyan can i have the name of your attorney if possible?
You can email me at aatish231@yahoo.com
Thanks
Sure, I will email you the attorney I am using. To my previous comment around calculation of the penalties, you should know that the IRS agent did not concur with the logic used by the attorney.
Kalyan: I read the two posts that you have. It is clear that the amounts should not be double counted. SO if you have FD in one bank and on it’s maturity the amount including the interest is transfered to another account, the increase due to the interest received should be accounted for and added up. Lets say for the year X3 one account had 25,000 and with maturity it became 32,000 withing the same year and it is transfered to a second account, you would reflect the 32,000 in the totals of X3. If i read correctly you are implying that the IRS agent wanted you to used 57000. That would not be correct. my experience is 25k plus 7k for interest for the year x3. then you see x4. this same FD in Year X4 will be 32K instead of 25K. Could you kindly elaborate what was the attorney’s logic and how he was trying to compute it.
Manjit, to be honest, the calculations were getting so complicated that after a point, I decided it was not worth the effort to understand them. I chose to opt out of the penalties so it didn’t seem to matter that much how the precise dollar amounts would have turned out.
Essentially, I just made sure that the balance indicated was corresponding to the amounts I had sent from the US to India as that was the entirety of all my FDs in India. Not sure how to explain the complexity via this medium. Your logic does make sense though.
Kalyan,
It would be interesting to know how the Opt-out worked for you. Please feel free to share your experience about opt-out. Many readers are curious about that as well.
Thanks.
Manjit, question that I am unable to get a good answer for from my CPA, hoping you will be kind enough to answer – if an FD that was created using funds sent from US to India matures and though there is an interest income in INR; there is actually a loss in dollar terms due to the currency devaluation, is there a way to account for that when filing US taxes? Or do we just translate the INR interest amount into USD based on current exchange rate and show it as income?
thanks manjit
after 11 months i finally got a letter from the agent asking for some info, dont know why he did not mail it to my attorney
at the bottom of this pdf files FIGURE II has nive stats about the ovdi program in 2009, 2011, 2012
Click to access IRS-Offshore-Voluntary-Disclosure-Programs-Continue-to-Burden-Benign-Actors-and-Damage-IRS-Credibility.pdf
Thanks mike. That is an interesting article.
Definitely do not call the agent yourself
An OVDI Odyssey
http://federaltaxcrimes.blogspot.com/2013/06/an-ovdi-odyssey-opt-out-success-story.html
manjit singh CPA,
After an agent is assigned and sends his first letter asking for some info how long does it usually take to get the closing agreement – 906?
In your cases do agents usually mail just one letter asking for some info? Or more than one?
thanks
additional information provided is simple and not complicated, consistent with what was declared in the original submission, 2 months is the average on our clients. in couple of cases there was no further questions asked. the interaction is usually with the POA attorney or CPA;
Hope this helps
Thanks again Manjit and Desi. We haven’t received the 906 forms yet. The attorney is actually suggesting that we opt out based on the circumstances of my case. She says they are working with a number of people in a similar situation, innocently out of compliance and facing huge penalties, and have gone the opt out route. There doesn’t seem to be any empirical evidence as to the outcome. as they haven’t had any of their cases reach conclusion, but the attorney sounded confident that the IRS will not act unreasonably. She also said that the assigned agent at the initial stage actually does not have any negotiating authority and has to act as per the IRS dictate as far as the penalty is concerned and the Opt out is the only way to have the opportunity to present innocence and non willfulness to the IRS.
There is still time for me to make a decision, but I’m definitely leaning towards opt out after this conversation with the attorney.
Your attorney has provided a good arguments for opt out, not knowing your specific case i cannot comment on it. Honestly she thinks the way i think. The million dollar question is, which agent will handle your case once you fill out the papers of ‘opt out’. Since your attorney has various other cases, and has walked this route, even though the cases have not concluded, at least she is in a position to answer, if the agent is same or a different agent will review your case. Furthermore, the FAQ has the procedure described and the alternate penalty computation formula also listed. Assume the agent does not agree to innocence and non willfulness what $ number you will be looking at. Once you know that number, even if with penalty it is higher but not substantially it might be worth taking the plunge and risk.
This is my thoughts and only my thoughts. Please act on it fully informed and understanding all aspects.
Best of luck
Thanks for the responses Manjit and Desi.
Are there any opt out experiences among the folks reading this blog? I’m getting to the point where I have to make a decision, the penalty amount is unreasonably high, and I’m not finding evidence of IRS being fair or unfair in their evaluation of opt outs. My situation is completely due to ignorance of tax-ability of foreign interest income and lack of awareness of the existence of such a thing s as FBAR…I went into OVDI as soon as I realized i was out of compliance…
I will obviously talk to my attorney but looking for any experiences people might have had yet with opt out.
I had a client whose experience i have mentioned in one of my prior postings. He went to an attorney and the attorney showed him, why the agent came up with the number she came up with and his advise was to accept the agents number and not go through the opt-out. the two numbers were almost same, opt out slightly higher. THe attorneys logic was it was proving ‘amnesty’. How far that was true, i do not know.
In the FAQ there is guidance on the opt out calculations,, however, I have not been able to do it and have the confidence level to recommend to my clients.
It will be a good idea to talk to the attorney and see what he suggests and if he is aware of any individual who has gone through the opt out process..
The attorney that was consulted is Thorn Law group in WASH DC. you may contact him, provided that the blog administrators do not have an objection. If they do, they have my permission to earase the reference to this attorney.
With my best wishes.
Kalyan,
So you got the 906 forms correct? I have referenced this article in my post but here is for your reference: http://www.irsmedic.com/2013/08/22/i-got-an-irs-letter-906-so-what-should-i-do-now/
What I would suggest is work with your attorney and find out what would be the highest penalty if you opt-out. Can things get worst with a full audit? If you think you want to opt-out, ask your attorney to talk to the agent once again and try to negotiate the penalty with logical reasoning about the balances in your account and how it wasn’t a will-full violation. This is just my opinion as per the article I linked before because agent might be as eager as you are to close the case and might reconsider instead of letting you opt-out.
Do you know what % penalty are they applying and on what balance? If 27.5% on certain balance, try to convince the agent for 12.5% on the second lowest balance.
This might seem a silly question, but once an attorney is eganged and POA signed, should the individual as the tax payer call the IRS agent assigned to the OVDI case directly? I got a letter from the agent stating she tried to contact my attorney but hasn’t received a reply. My attorney asserts there has been no such contact by the agent. The agent raised some questions on the OVDI submissions including balances, penalty calculations submitted etc which my attorney is preparing responses to, but I feel torn between the urge to call the agent and speaking to her directly to let her know she will have the responses vs. being patient and letting the attorney handle it.
This is a small law firm that seems to be prominently advertising their OVDI expertise and seems to have a lot of these cases on hand.
Any suggestions?
Kalyan,
Personally I wouldn’t talk directly to the agent since you already have an attorney. One main reason is you need to be careful what response you give to agent. You don’t want to speak out what you shouldn’t. Attorney knows how to format the answer and not to create any confusion. And by directly talking to the agent you might irritate your attorney which again is not what you wanted.
If you are really worried, you can just inform the agent that your attorney is working on the reply and ask if there is any deadline to reply the query.
Hope this helps.
The IRS agent is supposed to deal with the attorney, in the event that the POA does not respond, there is a system in place that they are supposed to go through including a letter to the POA and then contact you. You received a letter, please provide it to the attorney POA so that you have proof you forwarded it to him with a request that he responds to it immediately with a copy of the response to you. The good news there is a fax number on these letters and it DOES get to the agent. Request proof that the response was faxed in to the agent. The agents are under pressure to work these cases quickly otherwise they have to request additional consent to extend the time to assess taxes etc.. You should be putitng pressure on the attorney and occasionally ask about the status. ‘Out of sight out of mind’ especially when you are indicating that they have too many clients or still advertising for OVDI cases. We as a CPA firm have stopped advertising and because of one bad experience with one IRS agent in Florida and realizing that we were lied to by our client in the submission of the information, we do not want to be at risk of exposing other clients. One bad situation can cause IRS to review all our submission that WE possibly are the ones that are not doing ‘our due deligence’ and pushing the paper. Remember the Attorney and/or CPA is also signing off on the papers every step of the way that they are fully aware of the contents and attesting to the accuracy of the information. Imagine IRS’s recourse if later on they find out that the information submitted by the attorney/ CPA is not accurate what is their recourse. They can invalidate the agreement on grounds of fraud and go after everyone involved in the case.
Good luck. MS.
if your case simple definitely dont hire an attorney hire a cpa
stupid attorneys will scare you, will try to drag it fo as long as they can so they can hold on to your retainer, dont hire a lawyer if your case is simple
Desi, have you received a case closed letter yet?
============
your Current Status says: Waiting for IRS to send me the case closed letter.
============
Yes, I received the Closing letter. Now my attorney is working on amending my State returns.
I got a letter asking for documents, sent them, agent assigned. Received another letter asking for 2011 original and amended return and 2011 FBAR along with a copy of the penalty sheet.
Will be sending it.
Desiways – good to know that your case has reached conclusion.
Hi Friends,
Need advice!
My case is very simple, but I don’t how to proceed.
I have only one bank account and no other assets or income in foreign country. In the year 2012 my account in foreign bank went to US $ 10000, So in my last tax return form I mentioned that I own a foreign account and required to file TDF form, but failed to file TDF 90-22 before June 30th 2013. Do I still have to go through OVDI Process?
What is the procedure for late filling?
Thanks!
Since you had balance had exceeded 10,000 or more, did the bank not pay you interest income? Did you report that interest income on your income tax return in the US when you prepared your 2012 tax return, or for that matter, did you report all the interest income that you received in India on a Calendar year basis.
If you had received no income interest in any of the prior years then I would just go ahead and file the form TD F90.22-1.with full details of your bank on the form and attach a letter explaining the reason for the delinquency.
Could somebody please tell what is the balance threshold for 12.5% penalty for JOINT filers. Also is it true that each filer (even if filing jointly) should still have balance less than 75K individually to qualify for 12.5% penalty or the total balance of both the filer should not be more than the threshold amount.
Also, where to find the official USD exchange rate applicable for calculating the balances from 2004 onwards. Can someone let use know the rate from 2004 onwards.
Mayank,
For currency exchange rate you can check here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Treasury-Department-End-of-Year-Exchange-Rates
You can also go to xe.com or yahoo currency and find the year end rate.
For your penalty question, I don’t have any idea but will update if I find any info.
I would rely on the irs website. In our experience the irs has not questioned the exchange rate that we used, but I have retained a copy of the print out so that I can prove my numbers.
Our firm had different agents who treated it differently.
In one case we started out with husband balance over 10k and wife balance under 10k. and evaluated the where the non filing fbar penalty should be computed and not computed. Originally the agent agreed and then we found one of her mistakes. Man was that a mistake. One thing led to another and where in Jan 13, she wanted 8k, the client ended up paying 40k. + by maiking sure that the balances were over 75K
In case of a second agent, when we told him that this is a FBAR penalty and since the spouse account balances were always less than 10k, she was not subject to the penalty. the agent said ok, and wrapped up the case at 12.5%
Even though the spirit of the program is to catch ‘criminal’ and it still seems that all agents are supposed to be impartial and fair and well trained, out experience has been there is absolutely no parity.
It is your draw of the luck and what kind of agent you get to work with. I am personally disappointed. It is a shame that those who are trying to come clean, if they are actually being honest, and then the IRS does not give them leniency, there is no way out. You are indeed at the mercy of the agent.
Thanks a lot. When you report account statement , is mandatory report every transactions o just de higher balance.
Our clients have been able to get copies of their bank statements, if not online, by requesting hard copies. If you mention that you need it for income tax reporting in the US, they understand and are assisting their clients. It seems in this day and age of technology they have it available on computers and can print and give you a copy. You should request for copies of each bank account of past 8 years. 2003/2004 onwards. Of course if the account was opened prior to 2003, you do not need it.
Please be advised that when you are completing the penalty worksheet, you will report the highest balance during the 12 month period you had for each account per year. Please consider a line for adjustments if you had inter account transfers so that you are not double counting the same money in a specific account.
At the time of sending the paperwork, you are not required to send the bank statements unless the amount is very high. Of the top of my head, I do not remember the exact amount. Please remember, the IRS reserves the right to DEMAND the bank statements if they so feel the need of it.
In three of the cases we did the IRS demanded the bank statements and in, a rough guess 6 cases they just accepted what we indicated. My guess was they probably were provided the paperwork by HSBC case, that I distinctively remember.
Hope this answers your question.
Thank you for your help. But, you say I do not need it for accounts opened before 2003. Why?. And thanks again.
Hello Manjit so basically we get the copy of our bank statement for 8 years, we only submit the copy if IRS wants it. I am assuming if they did need the copy they will contact our lawyer?
Thanks
Yes. And don’t you think you will need it to calculate your highest bank balances and make sure that inter bank account transfers if any are properly documented and not counted twice and inflate your highest balance.
@Manjit,
I take when you said “Yes” you mean send statements correct? or you meant wait for IRS to ask for them. If later one then, to me, logically it doesn’t make sense adding one additional step in the process.
OR Did you see cases where statements were not asked for?
Just trying to get clarification for my understanding and leaving no confusion for the readers here.
Thanks.
Mo,
My attorney submitted the statements along with OVDP package because I am 100% that IRS will need the statements. So submitting it along with the OVDP package makes more sense. Otherwise what will happen is first they will send query asking for the statements. Then once you send them, they review them. Then there are chances they will have questions on the statements. All this back and forth stuff mailing will unnecessarily lengthen your process.
desiways
You mention that your Offshore penalty was 12.5% as opposed to the current penalty of 27.5% for OVDI (not that I want you to pay a higher penalty), can you clarify.
Do you know if going into OVDI impacts the tax payer’s visa or immigration status or will it create any red flags in future with IRS or with any law enforcement agencies that you are aware of?
AlmostCPA,
I think 12.5% is if the highest balance is less than 50K.
I am not sure but I doubt there is any relation to immigration related stuff. Not sure what happens if there is any criminal prosecution, which is very rare if you are just disclosing something you forgot.
As far as red flags with IRS, I have no idea but from now I am going to very careful when filing taxes and if needed use an attorney’s advice before filing instead of a CPA.
desiways
Besides 20% penalty for not paying the taxes, did they also charge you the interest on unpaid taxes? And if so, what was the interest rate roughly?
Almost a CPA,
No, I don’t think any interest was charged. Though I will have to check it to confirm.
Interest is statutory because you used the govt money. the initial computations that you turned in, or your accountant, or yourself, should have computed the interest as well. if not, you will receive a letter where the tax is computed, interest depending on different time frames and what the official interest rate was in effect and the penalty for late payment, thereafter, adjusting for the payments they have received with the initial computation worksheet, thereafter they will ask for more money or refund if overpaid.
Please keep in mind, the rule is, unless if is government error and you can substantiate it, interest will be charged.
The Offshore penalty of 12.5% is if highest balance in the period of consideration is below $75,000 including the FMV of rental property, stocks and bonds etc. If the amount on which the penalty is to be computed is greater than $75k, the penalty under the current ‘amnesty program OVDI, is 27.5%.
In one of our client situation we had computed it at the 12.5% penalty, but somehow the IRS agent did not accept the FMV of the rental property provided by the client.
We were not able to convince her that the property value was what the client provided, she insisted that ‘IRS has researched the market and a similar property in square footage, in Hydrabad etc. was valued at XYZ. Considering that the value became amount subject to penalty became higher than 75k, and we had to pay 27.5% penalty rate. We negotiated further, just partial consideration was given regarding the FMV but the penalty computation remained higher than the 75K. Could win this one.
Taxpayer had used his cost as the FMV of the property. Upon asking for the bank statements and seeing the deposits, and the explanation provided that they were loans from parents to renovate the property, the agent insisted that the improvement (and correctly) that it increased the FMV of the property.
Hope this experience helps all the readers.
Yes…that’s 75K and not 50K threshold for 12.5%. Thanks for correcting.
how i get my account statement of past years. I should go a each bank and ask for the statement of last eight years.
Baba,
See if you can get online. You will have to make good faith effort to obtain the statements.
I got a letter from IRS, they are asking me to submit Form 872 which is needed for extending the period of limitation, I do not remember submitting this form at the time of original filing but the interesting part is, in the letter I received they say they ae missing original 1040 for 2003 to 2010, and the amended ones, and the checkbox for penalty computation sheet was checked but I remember filing all these at the time of submission.
I will talk to the agent,but wanted to check if others had a similar situation.
By the way I started my process in June/ July 2012.
Thanks
Krishna,
If you see my progress, my attorney submitted 872 initially in June-2012 and then again in July-2013, when an agent was assigned and I received a query. We submitted new Power of Attorney as well.
Hope this helps.
Thanks much. Both myself and my accountant spoke to the person assigned, they were able to locate most of the documents. Sent the Form 872 and power of attorney.
Will let you know if I hear anything more.
Thanks again
Has anybody received any reliable information on penalties applicable in OVDI for retirement type accounts (scuh as providend funds). Is it a regular 27.5% penalty or there is any relief on retirement or pension accounts? Any information would be helpful.
Desiways,
Just want to know if your application has been assigned to an agent or was it just extension of SOL.
Just got pre clearance. Just gauging the wait time involved
Regards
Shan
Shan,
Yes I think so. As I got a query about my balances, which the attorney replied.
Does Home loan account need to be reported on FBAR?
FbarConfused,
Here is what I found:
http://sherayzenlaw.com/fbar-exclusion-of-personal-and-homeowner%E2%80%99s-lines-of-credit/
http://www.justanswer.com/tax/6e5l8-please-clarify-took-home-loan-bank-india.html
So from my understanding if you can’t do anything with the account i.e. deposit or withdraw, that account can be excluded from FBAR.
Do confirm this with a tax attorney with your particular account details.
My accountant told me to report the asset net of the loan ( mean asset value minus loan for purchasing the asset). In my case an asset was bought and I took a loan for it.
This is based on my accountant I am not an expert please talk to your attorney or accountant.
Thanks
No loans received is not subject to reporting on the form FBAR (to be clear tdf 90-22.1). It is cash and cash equivalent. Bank accounts, stocks investgements bonds,nd cash surrender value of life insurance polices. i am reasearcheing on the providend funds.
Hello again. I do have another question. I was informed by someone on the OVDI hotline that any tax compliant accounts would not be part of the penalty calculations (this is good news for me!). The problem is that “tax compliant” seems a little slippery. I must apologize for the length of this question . . .
For those of you with more expertise than myself, can you confirm (or correct) my understanding of “tax compliant” below?
1. All income from the bank account was reported as income to the IRS
2. US taxes were paid on said bank account income (i.e. interest) as applicable
3. The income sources (i.e. wages) used to fund the bank accounts were properly reported as income to the IRS
4. Tax was paid to the IRS on the income sources used to fund the bank accounts
5. (This is the tricky bit). Any errors made in calculating the tax due on the income sources used to fund the bank accounts due to a) incorrect application of tax rules, b) mathematical errors, c) other tax-payer errors DO NOT affect the tax compliant status of the bank accounts UNLESS the income was not fully reported.
By way of example for item 5:
I earn $20,000 in Canada. I pay tax to Canada. That year, due to time spent working in the US for my new US employer, I happen to fail to meet both the bona fide resident and physical presence tests for the 2555 exemption. However, I believed I met the conditions for one or the other when the original tax return was filed. Therefore I now owe tax to the IRS, even though all the income was correctly reported and I paid all the tax I believed due to the IRS at the time. Does this mean that any accounts funded with that income are now non-compliant per FAQ 36?
Many thanks, and I do appreciate the earlier prompt responses. There is so much misinformation out there, even from many so-called experts.
Ikraan,
As per FAQ#17:http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers says:
So as per my understanding a technical error shouldn’t be an issue and you need to amend the tax returns accordingly. Again it’s better to ask a professional to be on safe side.
do we definitely need an attorney or is a cpa enough?
sleepdeprived,
CPA is fine if you are sure you want to go for OVDP.
Almost all CPAs know nothing about the OVDI program. They will tell you to file the amended tax returns and pay delinquent taxes and you will be ok. I (trained as an engineer) feel like I know more about the foreign income reporting than most of the CPAs.
AlmostACPA,
The one I used for tax filing years ago didn’t even know I should be reporting interest earned in my NRE account. Had I done it on my own, I would have reported that interest and would not have been in this mess.
I regret my disclosure as I got penalized 25% even though the assigned officer told me I will most liketly be penalized 12.5% for 200K I have. I regret because, not only me but, my entire family and unborn future generations will be flagged for checks (investigations) of OVDI process in the irs system. Any sofware engineer understands this. I should have cleaned up my act without disclosing. Not just me but, in general deshis based on racial profiling (ethnic seach criteria) will all be checked for overseas accounts, **** wouldn’t be helpful to you either even though they raked huge economic benefit at your cost.
Reading what you mentioned above ..scares me a lot !! I was planning to do OVDI …:(
Very useful blog. I have a question: When sending the OVDI package in, should I include a check for the FBAR “in lieu of” penalty (i.e. that 27.5% of highest balance penalty) or wait until I sign the 906? I have heard different answers from different places so I am interested in what people have actually done. I do realize I need to send in a check for any tax owed, the failure to pay penalty, and interest on the tax, but don’t seem to be able to get a straight answer on when to send in the Big Check.
As a side note: my advice is to stay far away from any larger accounting firms. I spent something like $23k getting 3 years of the needed 8 years of returns amended (inaccurately, I might add), and having some minor clean up done on 3 years’ worth of business bookkeeping. Be sure that you work with a *trusted* CPA if you need assistance.
Ikraan,
I haven’t send the penalty but only the tax owed checks and IRS deducted some amount from my 2012 refund. I think that might be some kind of penalty/interest on the not paid taxes.
The OVDI packages we had worked on, we had prepared the amended income tax return, form 1040x for federal returns. For each return that was amended, we had computed the increase in taxes, the interest and the penalty and had clients write separate checks for each years and clearly marked in the memo section.
We did not make the Clients write the checks on the ‘FBAR- MISC’ penalty checks. The Revenue Agent (RA) who is working the case has the right to change the amount because of his understanding of the case and research. So for out of the 16 cases submitted, one client I chose to terminate relationship with, 9 cases settled, form 906 signed sealed and delivered, since the amounts calculated on the penalty calculation worksheet and the agent submitted amounts were identical, at the time of the signing of the 906, the taxpayers/clients wrote the checks and submitted.
In one case only so far, and I have requested an attorney to review and client has not made up his mind, the penalty calculation is not same due to method of accounting. In a second case the client is evaluating to opt out or not.
Bottom line, send the check for the penalty phase when you sign and return the 906. None of the revenue agents have complained or objected to it under the 2009 and 2011 OVD ‘programs’. we do not have any cases under 2012 program unless rules have changed, I would wait till they ask for it.
Thank you both for your response. Practical guidance was sorely lacking from our (now fired) accountants.
yes already filed 2012 on time. didn’t know anything about any of this until 10 days ago.
If I go with the 2012 OVDP program now, do I need to submit amended returns only for 2005 thru 2012? IRS website says past 8 years. Or do I need to submit 2003 & 2004 returns as well?
also, do we need statements for years prior to 2005 (assuming we amend from 2008 onwards) if the account was opened and has interest from before 2005?
Have you already filed 2012? if so, did you do it the right way or the old way?
2004 on wards, is my experience.
manjit,
Wouldn’t the period begin from 2012 since the deadline to file 2012 tax returns has passed (unless sleepdeprived has extension)?
I am referring to FAQ#9: http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers
sleepdeprived,
From my understanding you only need to amend for previous eight years. I don’t think you will need anything prior to eighth year during submission.
Always double check with a tax professional.
Hi Desiways,
Do we need to declare NSC (National Savings Certificates – Post Office scheme) on FBAR ?
Do we need to declare PPF (Public Provident Fund) on FBAR ?
FBARConfused,
I am not particularly sure of those but you might want to check these:
http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements
http://www.nsglobal.com/blog/?m=201207
VERY INFORMATIVE SITE. I LIKE RESPONSES POSTED BY DESIWAYS. HE IS CAREFUL AND HONEST IN SAYING ‘ I DO NOT KNOW’ CHECK WITH AN ATTORNEY.
May I take the liberty of saying that in the US income taxes are paid based on the cash system of accounting. you receive payment (interest) , you have income and subject to taxes.
What accounts needs to be reported on FBAR (TDF90-22.1 goes to Detroit processing repository independent of your income tax returns) I have defined it as cash and cash equivalent. therefore that includes – cash accounts, securities, fixed deposits, cash surrender values on your life insurance policies. Remember you are not paying income taxes on your bank balances but on the earnings..including rental incomes. Rents received. Reporting of bank balances on the FBAR forms and the 2011 IRS form 8938 is informational only not to calculate income taxes. It is an integral part of the income tax return.
NSC was purchased before coming to US…and it has tax exemptions in India…I am looking for answers whether this really needs to be declared in FBAR and whether one needs to declare interest on NSC while filing tax returns in US?
I read somewhere that PPF is like equivalent to social security scheme so you don’t have to declare it in FBAR…Is that right?
Hi Desiways ..Thanks for your prompt response..I have a few questions .Please let me know your thoughts..i just came to know about this FBAR few days back and i have missed to report the interest on my fixed deposits in india on 1040 and haven’t done FBAR either.And this goes back to 2007.I called couple of tax attorney’s on the list that you have given ..haven’t talked to anyone so far who seems to be willing to do in 3000 .My question is do we really need to declare all our accounts ? I have 2 accounts one with icici and the other with SBI ..which just has 50000 rupees…do i need to declare that ? And i did buy some aviva and LIC policies earlier ..The aviva ones have even expired and i don’t have any paper work involving these 2 policies.Any advise would be good ..Please let me know.
smit,
Your case is same as mine except that I didn’t have any policies. So I don’t have much idea on the policies.
Hi Desiways , Any update on your OVDI
smit,
No…attorney sent a status update query to IRS but haven’t heard back.
Hi
Here is my situation, I have a LIC policy in india.
I was paying premiums from 2002 at a yearly rate of $2K
Every 5 years there is a pay back of ~6K.
So in my case I got ~6K in 2007 and another 6K in 2012 both were deposited in my Parents Bank account.
I haven’t disclosed this income in either of the years and neither did I file FBAR
What is the right thing to do now to be tax compliant?
Samala,
I am not sure about LIC on FBAR but for the income, you can amend your tax returns.
I would suggest you talk to some qualified tax professional.https://desiways.wordpress.com/wp-admin/edit-comments.php#comments-form
Hi, I am new here. Just another immigrant with OVDI questions that needs help.
Which of these accounts need to be included to assess maximum aggragated balance for penalty:
1) Accounts you paid interest on with Form 1040 but did not include on TDFs ?
2) Accounts that did not have any interest income (checking account) and did not include on TDFs?
3) Only Accounts that had income and income was not reported and also not on TDF ?
My trouble is I have always properly reported my foreign income. My CPA started making
me aware of filing requirements of TDFs right when they started with the intense penaties.
Thing is , I always thought of it as , as long as I include all interest income I was doing
everything fine. It never dawned on me having to list account #s that did not produce
income. So I have a couple of accounts I did not always include on TDFs like checking account.
So far so good . My biggest trouble is now my foreign father had me sign some papers with
his foreign bank a long time ago so if something ever happened I would have access.
So there is a signatory as well as a couple of joint accounts that he also invested
with but did not poperly report taxes in his home country.
I never did one single deposit and only one single withdraw to close
accounts because he suffered a stroke and is in a nursing home not remembering anything (he is 86)
This is the main reason for my OVDI since a joint account makes me a co-owner.
Another question regarding FAQ #18 . Can you go thru OVDI process and file late
Form 3520 for inherited or gifted real estate a few years back ? None of these
assests produced income. There also was some cash I inherited paid inheritance tax on
put in an account and reported interest income in the US. Can that be submitted under
FAQ#18 or does applying for OVDI not allow to late report assests with no underreported
income ?
Thanks there seem to be a lot people with experience here .
Bali,
I am not too competent to answer them due to some complexity involved. I would suggest you contact a tax attorney.
For those in California: How did you go about amending the California returns after sending in your OVDI forms to IRS? In my understanding, California had a parallel “Voluntary Compliance Initiative 2 or VCI 2” but it is not active after October 2011. Nobody can participate in VCI-2 program after Oct 2012. So, should the OVDI-participants simply file amended returns 540x?
Prabhu,
My attorney asked me to amend State returns after my case is closed.
I received the response from IRS for my OVDI with three copies of Form 906 – Closing Agreement. I signed all those and mailed back immediately. Hoping to complete the process asap, but it appears that it might take another 3 months to get the closing agreements signed by IRS.
Prabhu:
Your file should be in the pipeline for a final review and a signature by the designated indvidual representing the commission of the internal revenue service. Much that we would like it to be done and over with, understand that there are hundreds of these cases and they are reviewed and re-reviewed prior to signatures and checked that there is no new information received into the system.
Prabhu,
Yes in my case it was around 3 months. Although it also include two weeks of govt. shutdown, which I believe might have slowed the process.
Don’t worry, with 906 signed you are almost done.
Closing agreement signed by IRS has been received. I had paid more than what was charged (including taxes due, penalties, fees, and the OVDI penalty) and haven’t received the remainder check when I received the final closing agreement. Next step is to mail the CA amendments.
In due course post settlement of the agreement, since it is part of a different part of the IRS (account sections) you will receive a statement of accounts for each year the excess or the over payment will be accounted for in a appropriate manner.
so in your case it took 4 months to recieve the Closing agreement signed by IRS? i thought it takes 2-3 months
Prabhu,
I second what is said by Manjit. I received like 4-5 letters or I should say bills from IRS. One for each year of amended tax returns and one was for the payment made for OVDI penalty. The bill will show the balance to be $0 due if everything you calculated before was perfect. If you overpaid, you will receive the refund check.
In my case IRS had deducted some money from my last year return, stating it as tax from 2009. But when I got these bills, it stated they charged me double and along with bill, came a refund check of the amount they charged and I think included some interest as well.
Hope this helps. I will update the post soon with this information.
Guys can anyone share how long the entire process take from Preclearence to when form 906 has been received?
Thanks
Almost 2 years(like 21 months to receive closing letter) to wrap up entirely. Not sure if their backlog is increased or decreased right now.
Please look at the progress time-line listed above. I have dates listed as the case progressed.
Desiways or any ovdi guru,
Do we need to include personal loans that we gave to others on the ovdi asset calculation. I do have a tricky situation where I gave money to a land developer and he gave me a loan agreement. Then he defaulted. Will this counted in the asset calculation.
Thanks for your reply. but none of my FDs matured in 2011 since I started FDs only in Q4 of 2011, no interest income from these FD in 2011 thus no tax to be paid either so is there still need to amend 2011 tax return?
Sachita,
I have read two contradictory views on that. Some say you need to calculate estimated interest and report. For the FD interest and 2011 amend, I would suggest talking to a CPA. And ask if they can refer you to some IRS publication that talks about FDs.
I believe there is one that talks specifically on reporting Interest. I will post if I find it.
Hi,
I started my fixed deposits in last quarter of 2011(> 10,000 but much less than 7500), but didnt file an FBAR for 2011.
For tax year 2012, I have reported the interests on FDs that matured in 2012 in my return.
Now I realize I should have filed an FBAR for 2011. should I still contact a tax attorney for this or should i file it on my own.
Also, for FDs the interest will be received only at the end of maturity, so I should only pay tax for interests for FDs that matured in that tax year, right?
thanks for your blog! extremely informative one I have ever found( better than forums).
Sachita,
Assume what your penalty would be and calculate your risk. You can definitely talk to attorney but in a very simplistic case with one year I would file FBAR for 2012. If required, amend 2011 returns. And forget about 2011 FBAR.
Again it’s better to clarify your options and risks with a tax attorney.
Does anyone have lawyers or good cpa in LA area?
hi desiways,
when you submitted your paperwork last year:
Cover letter
Copy of pre-clearance received earlier
Copy of Amended tax returns 1040X
Copy of foreign bank account(s) statements
Original delinquent FBARs
Consent documents mentioned above (Form 872 and Extend FBAR Statue)
Statement of Highest aggregated foreign accounts balance
Power of Attorney to allow the attorney represent me
did you include the OVDI penalty computatuion worksheet as well that includes an estimate of how much you may owe them? Also, since my balances never exceeded $500K I’m not sending banck account statements(per FAQ25 that’s required only if the balances are greater than $500K).
Can you confirm if the above list you provided is the complete set and that we do not need to send the penalty computation worksheet just yet?
thanks.
Based on my experience I did submit the penalty computation worksheet. I did not submit bank statements. My accountant looked at it but did not submit them. Either case you have to have them on hand just in case if they ask.
Hi,I we was wondering what a person should do in this situation…A Person has a GC (by mistake) but never lived in US.Filed every year US tax returns jointly with husband, a US citizen.Since THey never knew about the FBars and that had to report worldwide income to US(only spouse income was properly reported). Of course lawyers advised them to join the program and than opt out and others said to do a noisy disclosure outside the program;the income was foreign earned,interest in the bank was taxed where They reside and The 2 small bank accts where interest was under $400(per year or less) and of course was taxed,and that was only for 3 years and not 8 years.Any help from people in a similar situation??
Yes, you can deduct attorney and accountant fees. The cost of mailings are also tax deductible. Just register the letter and keep a copy of the receipt.
On a different note, why is there not more discussion of opt out from OVDI on this blog? Most people here appear to be minnows and penalty mitigation could apply. Don’t let your immigration status scare you in not considering an opt out. Cases in point are those of Mobymand ij. Their details can be found on Jack Townsend’s Federal Tax Crimes blog as well as on The Isaac Brock Society blog. Moby has even supplied links to copies of his opt out arguments that worked for him. Moby had very little time in the US, while ij had been here for about 12 years if I recall correctly.
Just a quick question, is the fee paid for OVDI filing and ammended return filing tax deductible. I know we can deduct return filing and preparation fee, but not sure of the OVDI fee.
Thanks very much desiways. Yes, I did have more than 10K at some points during this period. For filing the FBARs, do I need to pay any penalty? thanks for your thoughts.
Amentuerlmmi,
Check the FAQ#17 here: http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers
It says
Hi there,
I need your suggestion here. I have a NRE account with CitiBank and they have been sending me the 1099 for all these years which I have been adding to my tax return for all these years. Do I need to apply for OVDI and pay the penalty as well? Please confirm.
Appreciate your help..
Ametuerlmmi,
Were you suppose to file FBAR? i.e. was the account balance >10K at any time during those years?
If yes, Ideally you shouldn’t have to do OVDI, just file the FBARs you missed.
Has anyone considered opting out of OVDI instead of just signing the 906 and accepting to pay up the 25% or 27.5%.
It seems most immigrants with relatively low balances compared to real tax evaders have what the IRS call “reasonable cause” and that there should be no FBAR penalties outside of the program.
This is NOT legal advice. But I would look at the IRS FBAR penalty mitigation guidelines listed in the Internal Revenue Manual to see if you might get a possible lower penalty opting out of the program, and possibly none.
Also, when you opt out, the statute of limitation is 3 years for tax, 6 for FBARs – not 8 years inside the program. The IRS is supposed to reimburse you for the non open years (the first 5 years).
A good lawyer should look at your facts and determine if you are at criminal risk, as OVDI protects you against that, and in that case, you should not opt out. But if the lawyer determines that there is no material criminal risk, then the only advantage of OVDI is potentially capping the FBAR fine at 27.5%. If there is no risk of criminal prosecution AND the FBAR penalty mitigation guidelines show that your civil penalty will be lower than the 27.5%, then why enter OVDI in the first place? Other options to consider for people with the right facts are to correct the past with amending the past 3 years of wrong filing and send 6 years of FBARs with a reasonable cause letter, or start filing correctly for the current year and not correcting the past. All you risk is an audit that a prominent lawyer in the area says that the result of this audit should be the same as if you entered OVDI and opted out.
Anyway, just food for thought to discuss with experienced lawyers. It is worth paying some money for legal advice regarding these issues and asking the right questions.
The problem is that since the IRS says that the only way to solve this issue is to enter OVDI, a lot of lawyers will advise the same thing. But there is a conflict of interest here. They should be there to advise you getting the best result – not pleasing the IRS.
And for those interested, read what the National Taxpayer Advocate has to say about OVDI in her latest report to Congress:
http://www.irs.gov/irm/part4/irm_04-026-016.html
Good luck to all of you
SadImmigrant,
Thanks for sharing your thoughts.
Thanks a lot for sharing your thoughts. I have many friends who have had not field FBAR for few years because they were unaware of the requirement and have decided to file it from last year and henceforth. You are right the decision point is criminal risk. Do you have any suggestion on
– Good lawyer who can review my details and advice.
– Ballpark of charges for services of the lawyer for this purpose.
I contacted different a couple lawyers in different states for initial consultations. The most frustrating part of all this is that I got all possible answers for my facts. I hope I made the right decision.
Jack Townsend is very good in this area. And you can get a lot of information out of his blog.
http://www.federaltaxcrimes.blogspot.com
His rate for advice is a minimum of 2 hours at $700 an hour. This is pretty much the standard rate for experienced OVDI attorneys.
http://www.federaltaxcrimes.blogspot.com/p/before-contacting-jack-townsend-please.html
He has a list of OVDI attorneys on his blog:
http://www.federaltaxcrimes.blogspot.com/p/ovdi-attorneys.html
I would add one more to the list: Michael J Miller:
http://www.robertsandholland.com/MMiller
I would also recommend these links:
http://www.federaltaxcrimes.blogspot.com/2012/04/opting-out-3-4412.html
Educate yourself and do your homework prior to contacting a lawyer to make it worth the time. They’re worth the $700 an hour to help you make the right decision.
SadImmigrant – Did you opt-out and what has been your experience so far? I am in a similar boat, got the closing a few weeks back and have to decide whether I pay the 25% penalty or opt-out and I cant seem to come to a decision. I have consulted with a couple of attorneys but no guarantees for the outcomes. If the worst is what the closing penalty is, then it is a no brainer but sadly it is not.
Desiways – great blog and thanks for your efforts.
Desiways,
Thank you for these detailed posts and your prompt replies. I have a question:
In 2012, the aggregate balance in my foreign accounts crossed the $10,000 mark for the first time. I’m planning to report my interest income in Sch B and also file the FBAR while filing 2012 returns. Prior to 2012 I never reported my interest income (never more than Rs 1,000-2.000) as I was not aware of this requirement. I also never filed any FBAR as it was not required (balance below $10,000). Is OVDP for me? The IRS website says “Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution”. I was not required to disclose foreign accounts before 2012 but I might have under-reported some interest income. Do I need to file ammendments for prior years?
Any input would be highly apprecialted.
Neha
Neha,
Since you didn’t miss filing FBAR you are good. Just need amendments.
Talk to a CPA to get things cleared, though not sure what their charge would be. Since this is a tax season sometimes CPAs increase their rate based on how busy they are.
Hope this helps.
Hi desiways and other folks
Apart from the highest account balance in each account for the reporting years, it appears we also have to provide the fair market value of any assets (home, land, etc).
Does the asset value need to be added directly in the OVDP penalty calculation e.g. if I have an asset I bought for $100K in 2006 and took out a $80K loan with a bank in india, for year 2006 should I show the value of the asset as $100K or $20K (the net worth) as this makes a huge difference in the penalty? Also, how do I show this value in subsequent years when the amount owed on the loan keeps reducing.
I have been preliminary accepted into the OVDP program and the letter from IRS stated that I should read through and provide info in FAQ 25 at irs.gov. Reading through this, I see we have to fill out 2011 foreign acct/asset statement & form 8938 for 2011, has anyone done this?
The FAQ25 does not talk about filing delinquent FBAR’s, is that required? Should we also send the OVDI penalty computation worksheet at this time along with the amended returns (1040X)?
thanks.
NellaiXpress, s
So, penalty is determined based on sum of highest amount each year or it will be based on highest amount in any ONE past years?
Ohm,
Highest of ONE year only. Not all.
Regarding Steps 1 & 2(pre-clearance & Disclosure Letter), did the IRS send their replies to only your attorney? Or to both of you?
mike,
Just the arroney.
it seems I have hired a bad lawyer, he write me this:
“I can almost guarantee you the IRS will lose the disclosure letter once we send it in without the amended returns”
I am cleared for OVDP (Step 2)
I have not done Step 2 yet, I will next week, and my attorney wrote me the above, why? Only the letter and attachments are required for Step 2, amended returns are not required. My letter and attchments are ready and he wanted to get a 90 day extension, unbelieveable, the guy worked for IRS for 30 years, believe it or not
mike466466,
May be he used to lose stuff while he worked for IRS 😀
Joke aside, I don’t know since my attorney sent package with amended returns.
Hello,
I have to submit my letter next week, 2 questions from you:
I see you sumbited your documents in 06/12
Have they replied yet? it seems it takes a long long time
also, when you sign your consent to extend statue of limitation, how many months/years did you extend it to?
Thanks
mike466466,
No updates since 06/12. I think 2003 to 2008.
an agent is assigned to my case in the OVDI 2011 process a few months back and he has asked for bank statements for 8 yrs. My concern is what if I don’t know of some entries in the logs? some deposits? If an entry is specifically asked by IRS, and i say i dont know is it ok? Any experience and advice from anyone?
Bhaskar,
Do you have a lawyer or you did it on your own? It’s normal not to remember all small transactions from past 8 yrs if it’s not properly mentioned in the statements. I think it will depend on what transaction amount.
I did in on my own…amounts are approx. Rs 10000/- some in PPF accounts types….my overall account values are in the range of Rs. 4-5 lakhs. Can I just say I don’t know?
Bhaskar,
To be honest, I don’t have any yes or no answer. If it’s really old and there’s no way to find out what that transaction it was and even you don’t remember, then there’s no choice other than to say you don’t know. Then it is upto the IRS officer to decide what to do.
Thanks for your blog. I had say $10,000 in Account1. Mid year I moved the $10,000 to Account 2 and then finally deposited in Fixed before end of year.
Now do I need to report 3 accounts (Account1, Account2, FD)
And the penalty will be for the highest amount in each account ( 3 penalties for the same amount? )
NellaiXpress,
Yes all accounts but the penalty is on the total balance i.e. 10,000 and not per account.
Thats better.. and the penalty is for each year ? (ie if my FD is for 5 years , then penalty = 5 times ? )
NellaiXpress,
No it will be on the highest balance and not per year.
Deiways ..did you not pay taxes for your India income at all? Or did you decide go for ovdi because you had not paid taxes in India.
My case is like all othe people. I came to us in 2005 dec, got gc in 2010. I kept getting paid in India till 2010 for which I paid taxes. Then I put the money in CDs and other savings accounts. I have paid taxes for these years I have proof of that.
I have several accounts in couple of banks fd,savings etc.
I have paid taxes in India. Do I need to just file delinquent fbar or also amend previous years of taxes.
I am planning to correct this and talk to a CPA and start whatever he suggests.
Kumar,
My income was the interest earned in my NRE accounts and wasn’t liable to tax in India. It was interest which wasn’t reported in the US tax returns was the problem.
If you paid taxes in India, you can take credit for that. You will have to amend the tax returns. If you owe nothing to IRS, then you should be good as far as FBAR penalty is concerned. You might even not have to go through OVDI but just file delinquent FBARs. But if you owe something to IRS, I think then it might be a different case.
So, yes get professional help on this.
Desiways – since you filed the OVDI Letter – did you file attachments (for account information) along with OVDI letter for both NRO and NRE account? Attachment I am referring to is here – http://www.irs.gov/file_source/pub/irs-utl/ovdp_intake_letter_attachment_final.doc.
Or is it just for NRE account?
Thanks!
LateFiler,
I don’t have NRO account. But from my understanding, I think it doesn’t matter if it’s NRE/NRO or other type of accounts. If they need to be declared, you will have to provide the info.
What’s your attorney saying? or are you doing it on your own?
I decide to do on my own since the amounts are minimal. I re-read the OVDP letter – it does seem like we need to have attachments for both accounts.
It is 100.
Update on my OVDI
I have started receiving letters indicating that I would be refunded the amount for tax year 2007 and 2008 (so far I received only those two) and they say the legal period to collect taxes is over and they cannot collect it. For 2009 and 2010 they said I overpaid and would be refunded the difference, I am suspecting we paid penalty when it might not have been needed.
I called the IRS Helpline they say the notices will come but the refund checks may not come as they have a freeze and once they close all years they will send out the checks otherwise they will use it for pending taxes, this is what the letter indicates as well.
Now I called the number in the letter and they said, they were sent the returns and told that it was not part of the OVDI program and so they started sending the letters saying they cannot collect the money(beyond three years )and anyway my tax amount>100 USD. They indicate that I may not have been accepted, is this because my acceptance has not come through and we sent the returns before that instead of waiting for the acceptance.(IRS itself has stated that it is OK to send the whole package at once without waiting for acceptance)
I am talking to my accountant and finding out whats going on.
Just wanted to update and see if anybody was in the same boat.
Lot depends on which your bank is in India. Some Banks (typically the ones with modern infrastructure) are very co-operative in this regard – at least it was true in my case. My bank sent me the last 8 yrs worth of statements in less than 24 hrs!
How to get bank statements for previous years from USA? My accounts are resident indian account and they are asking to come in person. Anybody had similar situation and how you finally got the statements?
Desiboy,
So I take it that your bank doesn’t allow account access via internet. I printed my statements online.
Your bank is the one who should provide you options on how you can get statements by mail.
May be a Power-of-Attorney like thing to your family member. Ask then what other options you got?
Thanks for the quick reply. Problem for me is I have few months statements for each year. But my attorney is telling that I need all the months statement. Did you also provide all the months statements?
Desiboy,
I was able to print my statements online for the years they were required. Since I can select the date range online, I just had two prints per year showing transactions for 6 months period on each.
I am also a recent non-immigrant worker (2nd time) and recently came to know about these requirements. At this point doesn’t know whether to go for OVDI or just pack my bags and go back. Here is how my case details looks like.
I came to US first time in 2002 on H1 through my indian consulting company and went back in 2004 after completing my assignment here. I filed my taxe returns for 2002, 03 and 04 but did not include interest income from india and neither declared Indian bank account (even the CPA who filed my texes did not tell me about that).
This time i came here in 2009 on H1 and filing my texes regularly but did not include interest income from India in my returns. Also did not file any FBARS. My 2009 return was 1040NR, but afterwards all the returns are resident returns i.e. 1040.
Between 2004 and 2009 i also went to few other countries through my company for assignments and opened accounts there during my stay.
Now i have no idea what to do about my situation. I have few accounts in India including the employee providend fund. Even if i go for OVDI, i do not know what all paper work i need. Do i have to get bank statements for each of the account for last 8 years (looks like a huge task). Do i have to also include years when i was not in US i.e. 2005 to 2008.
Since some of you guys have already gone through this process and also spoken to CPA/Attorney, could you please advise how to go about this.
@gupta: Since you came here as a non-immigrant, you are only supposed to declare your financial accounts (and pay taxes on the income earned) for the years you spent in the USA. I don’t see a need to include the period (2005 – 2008) for which you were gone since you were not a “US person” during that period.
As far as what to do about OVDI: Ideally, you are SUPPOSED to disclose all the financial accounts you have in India (for 2003 – 2004 and 2009 – 2011 periods) and amend the tax returns. I know this can be a very daunting task. I have heard that IRS is considering advancing the back date to 2004, so that should help you some.
My advise in general:
1) DO NOT talk to anyone except close, trusted friends. If you talk to an unknown CPA by phone, DO NOT disclose your real name (call from your work number) because he/she might blow whistle on you (IRS is offering portion of the money they collect to the people who report).
2) DO NOT file on your own – use a CPA you know and trust.
2) This is a BIG money making business for the CPA’s and tax attorneys and they WILL make you feel vulnerable. If you have a CPA and you trust him/her, then try go with him/her first.
3) DO NOT panic – the language that the IRS uses on their website seems very harsh, but I found the IRS to be quite reasonable to deal with. You don’t have to wait until you have everything accurate down to the last penny. Just do the best you can – you can always amend it later.
Thanks Nitin for clarifying stuff for visitors here.
Your point #1 was the exact reason, I never contacted a CPA. I always called tax attorneys. I did give out my firstname and also left my contact number for some to call me back (You need to take appointment for some attorneys for free consultation). One of them told, I don’t need to give my name if I don’t wish to and everything will remain confidential, whatever be my decision.
Thanks Nitin for the advise. One more thing..what all documents i need to collect before i can go ahead on this. I have Tax returns from all the previous years. Will i be needing Bank statements from each of the bank for previous years dating back to 2003. Do they easily provide old statements? What else i need from each of the Bank.
Any other thing i need to be aware of..
Once again thanks for you help, i really appriciate it.
@gupta,
Check out the Documents list here: http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program
You will need statement or any other form of documents that shows the balance of your accounts for the years needed.
Nitin, I do agree with most of your views. just a few cents I would like to add here is “A CPA can not blow whistle or leak clients information received as a trusted adviser without jeopardizing his license”.
@gupta: My experience tells me that the IRS DOES spot check the information you provide them and they will most likely request the statements from the year in which you hit the maximum total balance (penalty base amount) AND one year before and one year after statements for verification. This is what they did in my case anyway.
Nitin question to you
1) was your amount less then 500k.
The reason why i ask is that i was told by my lawyer that if the amount is less then 500k they don’t require bank statement unless IRS ask them
2) Did the irs ask you for Bank statement for those 3 years or Your original tax return as well.
Just curious
Mo,
I am not sure if that is something new or your lawyer had different experience, but I don’t see why IRS wouldn’t want your bank statements? That’s how they will know what your Max Balance was otherwise, someone can say max balance was 15K but in actually they had 100K…
In short statements are proof to support your max balance claim…
1: Mine was less than 500K. I submitted my statements along with tax returns with my OVDP application.
2: I submitted statements for 3 years…but again that was because my NRE accounts were only 3 years old.
MO:
It all depends on the agent assigned to work the case. We have had may be three cases where the bank statements were not requested. In one case, and i will not hesitate to say we missed the point, and the IRS agent dug deeeeeeep in and came up with a 10 times the amount of FBAR penalty that we had computed. And she would not budge from there despite my talking to her manager, the technical adviser and all kinds of legal arguments i could present. The client went to the attorney and the attoreny explained with example how the agent came up with the numbers and that would have been the formula that would have been used to calculate the penalty if the taxpayer / our client had chosen to opt out. so the client just paid. Remember the IRS agent DOES not have negotiating power at all.
Manjit did your client had a property? rental property? it can’t be a bank account right?
We received form 906(closing settlement between IRS and us) middle of Aug this year, which we signed and sent back and were told to expect the final executed copy. We havent received the final copy but received a form 872(Consent to extend the time to assess tax) and a consent form to extend time to assess civil penalties for FBAR voilations. We have been told to sign and send back in 10 days.
Anybody else in same situation.
@Nitin – did you ever sign the form 872 ?
Normally if you receive form 906 then your case is about to close so there should not be any need of form 872 but it looks like it is a standard process of IRS to send this form to all OVDI applicants whose case is open in their database. I received this form for all my clients. You should have your representative call IRS to find out if it is required for you to sign this and send it to them since your case is near to the closing agreement.
@Seema: That form was part of the OVDI package and should have been included with your submission. It sounds like you forgot to do that and they caught it while going through their checklist before signing off the closing agreement. I would just sign it and send it back ASAP.
Ms. Kapoor, initially submitted consent gave IRS time up to Dec. 2012 to assess tax, interest and penalty. Dec. 12 is approaching and IRS was still not able to clear number of cases. In order to protect interest of IRS, they are sending these forms again just in case they need more time to assess tax, interest or penalty after December 12. If you already sent form 906, these forms are just a formalities and may not cost you anything more unless one is planning to opt out.
We probably have filed highest number of OVDI cases in 2011 and 2012 OVDI program. We make sure that each client case is professionally evaluated, prepared, represented and the interest of our client stay protected.
One more thing….If you have invested in mutual funds in India, then you have another level of headache to deal with. Foreign mutual funds in general are VERY messy to report to the IRS. The US mutual funds are required (by SEC, stipulated by IRS) to distribute a certain percentage of the capital gains accrued to the holders AND report the same in 1099 every year. Since not all foreign countries have this rule, IRS forces this rule on all the foreign mutual fund holders and YOU as a customer have to apply this rule. It is called PFIC (Passive Foreign Income Company). The form is complicated, but basically what it does is forces you to do is track the mutual fund value (it is called MTM method) and determine how much capital gain would have been distributed had these funds were in the US and they want you to report THAT number for EACH year on EACH mutual fund…..ughhhh! Adding insult to the injury, the so called “capital gain” is no longer taxed at the 15% capital gain rate, but at ordinary income tax rate (because it is a foreign MF?…never understood this). You will need a CPA for this for sure!
Nitin – You seem to be knowledgeable about the PFICs which is a complicated process as your described. If you don’t mind, can I ask/discuss a few details on that. Please email anandsharmalowell@gmail.com so we can do this very specific topic offline as it gets very technical with multiple funds over many years with either losses followed by gains or vice versa (and how to reclaim what one has paid for paper gains in earlier years!) The value at an intermediate year-ends may also figure into the max penalty calcs if that year happens to be the peak one. Will appreciate your reply/time. Thanks
Thanks a lot for your sensible advice. I appreciate that you have taken the trouble of documenting all the steps and the details with all the relevant information.
Would you know if this disclosure ( and next steps ) applies to
– stocks and investments made as at the time of being a non-permanent resident and earning no interest on the funds but only dividends
– property which is occupied but since it generates rental income , the tax is already being filed in India ( to take advantage of the 80C deductions )
– taxes were filed each year in India declaring the rental income , interest income and paying relevant taxes and so were not included in the tax in US
– no NRE accounts but regular checking and savings accounts.
i guess the questions apply to many people who came over with all the various types of accounts and now that they have becomes PRs or maybe are full year residents ( as per Tax rules) , how do we deal with those accounts and investments that are not NRE and not being used ( other than deposits of interest amount ).
thanks again for your extremely to the point hints and guidance and its a pleasure to encounter this level of professionalism in a blog !
P
@Patel: You have to use your own judgment to determine what is appropriate to disclose by assessing the risk involved. However, I can tell you what you are SUPPOSED to disclose.
If you had financial accounts prior to becoming a US green card holder AND you continued to have those accounts, then you have to disclose those accounts. If you acquired your green card prior to 2003 but you continued to have those accounts 2003 and later, then you have to disclose those from 2003 onwards. However, if you close those before 2003, then you don’t have to (BTW, for OVDI 2012, there is a buzz that may advance the back date the period to 2004, but for n ow it is still 2003).
You are supposed to disclose ALL the financial accounts – Stocks, Mutual Funds, FD’s, Savings accounts (NRE, NRO and resident accounts) that were active any time during 2003 – 2011 period.
For OVDI 2011, real estate was not required to be disclosed if it did not generate income. For OVDI 2012, that rule has changed, but it does not become part of the penalty base – and that’s good news!
If you have a property that is rented out, then you HAVE to not only report the income on the schedule (I think it is E?), but the entire property value now becomes part of the penalty tax base. This one can REALLY bite you hard. Even if you paid taxes in India (through TDS or otherwise), you still have to show it on your return and claim the foreign tax credit (provision against double taxation). The income thus earned will be added to the AGI and could put you in a higher income tax slab – this is what IRS is hoping to do so that they can collect more tax from you.
Having said all the above, I would once again like to emphasize that there are plenty of “vultures” out there ready to “help” you. They thrive on honest people who made an honest mistake by not disclosing foreign accounts earlier, because they KNOW that these honest people are generally scared and would pay high sum to be in compliance. Good news is that there are plenty of good hearted, honest, knowledgeable CPA’s out there who genuinely want to help you at resonable price – I would start with the CPA that you are currently working with on your yearly tax returns. Even if he/she is not up to speed, he/she can learn and come up to speed quickly – I had to educate my CPA and we worked together as a team for my OVDI. It was probably the toughest time of my life, but I survived. At that point, I vowed that I would help others who are facing the same predicament if I survive the ordeal. It was a mess, but all cleaned up now and I sleep better at night.
My inputs are not advice but what I know based on my experience, you have to report all financial accounts that are open between 2003 to2010 including stocks and investments. I had to report stocks fortunately most companies in India give you online statements, atleast mine gave me a login and I downloaded the value of the portfolio as of 31-Dec of each year.
Thanks
Hi Nitin,
You are an inspiration to me. I was really impressed with your comment “I would help others who are facing the same predicament if I survive the ordeal”. I would like to join hands with you in helping others as I am undergoing the same ordeal now.
If you like, please share your email or phone # to my email ID RaviRaj5@hotmail.com so that we can get in touch with each other.
They basically accepted my entire submission. They DO spot check some numbers, so be prepared to send them copies of original statements. In my case, they asked for a proof showing the max balances were correct in the last three years. I submitted the statements (through my CPA, of course) with the max balances highlighted. One advise I would give is that ONLY submit what they request – nothing more, nothing less. Don’t give into the temptation of dropping a note to explain something. It will only slow down your case. Once they accepted my submission, the agent called up my CPA to verbally notify of the outcome. Soon afterwards, a packet came in the mail with form 906 (closing agreement between IRS and me), which I had to sign and send back. A month or so later, I received a copy of the form signed by them – case closed at that point! I had paid all the taxes and penalties along with my submission, so the only thing they billed me for was the interest on the back taxes.
Nitin,
Thanks for sharing your experience. Quick question. Seems like you dont need to submit copy of original bank statement if the amount is below $500,000. Mine is way below, do you recommend to submit or wait for them ask for it.
confusedbar,
From what I have read, IRS will need it at some point before accessing the penalty. How else would they know the highest balance and they won’t just rely on what you write. The need some proof.
I had mine handy and attorney has already submitted it.
Thanks desiways. Question: When you do the ODVI do you send in the penalty or can you send a letter requesting for review of penalty or before you do the ODVI can you send a letter explaining the case.
The case in point is the NRE account was used to send money for family maintenence, they took it some time after it is sent, end of the year the balance is <10,000$, however during the balance is higher because the money is yet to be withdrawn.
It took one year and two months – start to finish (obtaining pre-clearance to receiving the final closing agreement). I thought $4K was a bargain compared to some of the quotes I received. Like I said, this is a BIG money making business for tax professionals – almost like a conspiracy between the IRS and them! More complicated the tax laws, more money they make. Why do you think the simple, flat tax system does not exist today? If it did, more than half these guys would be out of business….strong tax lobby will NEVER let it happen. You have probably heard about FATCA (Foreign Tax Compliance Act), which is supposed to go into effect in 2013. Expect to see mass exodus of capital from this country – all thanks to Obama and the democrats.
Nitin,
Could you share the verdict in your case? I filed almost an year back.
I filed OVDI in 2011 and my case just closed. Before I decided to file, I talked to lawyers, CPA’s and some “experts”. Thankfully, my case was simple and went smoothly. I went through hell gathering all the records dating back to 2003, but I am glad it’s all done now.
This would be my advise to those of you who are thinking about participating in OVDI 2012:
1) DO NOT go to a lawyer, period. These guys will make you feel like you have committed the worst crime in the world and they are the only ones who can rescue you. Go to them only if you get criminally prosecuted by the IRS. CPA’s will do a fine job.
2) Please remember that OVDI is a BIG money making business – for tax lawyers, CPA’s and of course the IRS. Hence, whosoever you talk to (Lawyer or CPA), WILL put his business interest way ahead of yours. They WILL make you feel vulnerable with all the jargon and what not to win your business. I was told that one CPA in Chicago handled 100+ cases at $6 – 7K a pop…..yes, BIG money for them!
3) DO NOT go on your own. Use a CPA with good good track record with the IRS – no need to go to a fancy CPA who likes to blog a lot.
Nitin,
Thanks for sharing your experience.
I do agree with you that CPA would be cheaper and a better option when case is straighforward and simple. Most important thing is to find a competent CPA who has proper knowlege of OVDI and that you are sure you want to go for OVDI. I do feel I should have gone for a CPA.
Do you mind sharing how much did it cost you for CPA fees and more info on the penalties, etc.
I paid around 4K to the CPA. I filed OVDI in 2011, so the penalty was 25% of the MAXIMUM asset value. Remember, assets include only the financial accounts. Real estate should only be included if it produces income. The FAQ on the IRS website is pretty clear.
Thanks Nitin.
Though I was expecting CPA to be a lot cheaper, may be like $1500-2000.
It’s been 4 months my OVDI package was submitted, not sure how long will it take.
I went through a CPA who said he will get help from attorney as needed. And paid 5500 $ for OVDI and amended returns all the way from 2003 to 2011.I filed only a month ago but the CPA said it would take a year before I hear from them.
Also on real estate the rules for 2012 says that you have to disclose but if there is no income then it is not included for the penalty base.
Just sharing what I was told I am not an expert so as others (desiways and Nitin) have mentioned getting a good CPA helps.
Thanks
Krishna Kumar V
Thank you Krishna for sharing your OVDI experience.
very very good post
i agree
so who are some of the good CPAs who take OVDP cases?
Check this: https://desiways.wordpress.com/2012/02/26/finding-a-tax-attorney-for-ovdi-fbar/
Hi nitin,
If its not too much ask for, could u please share name of the cpa u used… I am in the same boat where in the lawyers are using big jargons…
Thanks,
Dhawal
Thank you very much.
The penalty is the OVDI penalty, on the year when the balance was highest for foreign accounts.
I think I am also going to go with the POA and his name as the representative in each return.
Again your blog was a very useful one and thanks for your response.
Krishna
Krishna,
I don’t think you should be paying penalty before the case is accepted. Attorney’s job is to try to help you so you can avoid penalty.
Without the acceptance, why is he asking you to pay penalty?
Confirm with your attorney if it is the ovdi penalty or penalty on the amount you will owe when you amend taxes.
Sorry my bad, here is how it goes,
1. File the amended tax returns along with tax, penalty and interest payment.
2. File the OVDI penalty worksheet and the Foreign account or asset statement, consent to extend Statute, FBAR’ s for the various accounts for years 2003 to 2010, ( no payment right now, till an officer is assigned and the officer certifies it)
3. Whenever the certification is done, I will make the payment, in my case it comes to 12.5% of the highest balance in one year. He says there is not much he can reduce as my balances are bank accounts and stocks. I am not eligible for the 5% and 0 percent can be argued but as far as the OVDI program goes IRS goes by the rules with the officers having no discretion.
Thanks
Krishna
Krishna,
That makes perfect sense. Thanks.
Hi,
I am also going through this process, and currently filed the OVDI letter and waiting for acceptance, however I have a few questions and your inputs are appreciated,
My tax guy says,
1. we do not need to wait for the acceptance of the ovdi letter and we can file the penalty computation and amended returns , the consent and all. Is this correct or should we wait for acceptance?
2. One more thing, what are the service agreements that you enter with the tax accountant who is representing you, for example, his name appears on the returns and we already filed a power of attorney for the tax accountant to represent me in all OVDI and FBARs. Is there any other agreement or contract or document to retain their services that I should be asking from my tax accountant?
Thanks in advance for your inputs.
Krishna,
1: I am not sure on first one. What penalty is he talking of? Amending tax returns isn’t dependent on OVDI. So filing it before shouldn’t be an issue. Mine was done after acceptance.
2: I think the POA is the one I recall so as letting him represent me.
I too am a recent immigrant, and the amounts in the overseas accounts that the IRS and U.S. now want a BIG chunk of was given to me by my parents and earned while I was living overseas BEFORE I became a U.S. Green Card holder; not a single penny was earned in the U.S., not a single cent was sent from U.S. to overseas. Now, I am not a person to make any of my views political. And, being only a U.S. Permanent Resident, I cannot even vote here. I am only mentioning this because it has touched a personal, raw nerve, same as with so many others. If any of you, in the International Community here in the USA, are now U.S. Citizens, and are impacted by this OVDI issue either (1) do NOT vote for the current US Administration again in 2012, or (2) switch your vote to the Republicans. There is no reason whatsoever that the current U.S. Administration and the IRS should make, decent, hard-working people in the International Community (regardless of ethnicity) foot the bill for the Tax Gap that is going on here in the USA. It is embarrassing that we should put up with being accused of Criminal acts! And, it is simply wrong and outrageous that our parents’ earnings (handed down to us as a result of their sweat and hard work) is being taxed and penalized here in the USA. Weather you are an Immigrant from India, China, Canada, Australia, etc. start a movement for change.
Very true. In a similar boat where i may have to pay 100% of what i have overseas which was earned when i was outside US.
Wait till you get into the OVDI, then you will be shocked with the bill/penalty! I am being billed for $400,000 due in 2 weeks. This amount is due to my property value that went up over the years…but since I am not selling it, why is IRS treating my property as if it was an income? Basically IRS lie about the FAQ as they were never clear. Look up Tax Advocate Nina Olson, even she said this is “bait and switch” on the part of the IRS. Once you join the program, you are in big trouble! I only have one property that’s it, and the penalty will clear my bank account. Trying to do the right thing is good as long as you are not dealing with crooks like the IRS. I am considered non-willful offender but does IRS think so? Do I have the energy to fight them, and of course even if I am off with less penalty, the money I saved would be going to the greedy lawyers who would certainly drag out the case, or even more money spent in the end. So in conclusion, don’t disclose!
My friend, FFF, please re read FAQ 35. Real Estate is specifically listed there. Real Estate value is included in the computation of the penalty because it helped you to earn the rent on which you did not pay income taxes in the US!.
Why did the IRS go after HSBC people. Because the managers, officers etc.. assisted and promised that they will pay interest and not report to any one. People caught in this mess is not naïve people however they participated in having bank accounts because of the greed that that particular income shall not be reported and no income taxes shall be liable because of non reporting. Honestly, had they reported income on their returns no such problems for those individuals, other than not having filed the FBAR forms.
People who have had bank accounts with CITIbanks, do you remember when they started issuing you 1099 that showed the interest earned and the foreign taxes paid. How many ot those individuals still opted not to pick up that interest. Everyone picked it up because they were afraid that the IRS is aware of it now. Seriously when the IRS won they ‘John Doe” summons against Swiss Bank UBS, Citibank realized what soup they could be in, they voluntarily started issuing the 1099’s before IRS came to knock on their doors.
My friend my advice to you is, do not give advise what to do and not to do. Let the people who are affected do what they want to based on their ‘din aur iman’. Let them read these comments and the FAQ and goodle the consequences and decide if they have the stomach to assume the risks.
fff
Can you share if the $400,000 was derived as 27.5% of the gross property value or fare market value minus the Loan amount due to the bank (if you had a loan on it)?
My dear Friend, I am impressed by your support of the republicans. I think you have forgotten that your republican president, George W Bush is the one who started going after the immigrant community that conveniently chose to avoid paying income taxes to the US Government by maintaining accounts overseas and choosing not to report the rental income or the interest income they earned on their foreign bank accounts.
As an accountant who has assisted many a person file for ovdp/ovdi I am pained by the amount they have ended up paying the US government. I had a client who is 80 years ago who, after reading about the OVDP in October 2009 voluntarily went to the Criminial Investigation office of the IRS in Northern Virginia chose to come out clean. Not realizing that, ‘ personal property in the FAQ’ refers to real estate. I argued with the IRS but the manager did not agree, hence the client when to a lawyer.
It is my understanding that the lawyer was able to have a satisfactory resolution, unfortunately, he still paid the penalty for the very many years that the income tax in the US was avoided.
It is the peace of mind..and being able to sleep without a dragger dangling over your head whether you will be caught or not. As Clint Eastwood says, ‘ Do you feel lucky’? Do you want to take the chance then it is definitely your choice.
What bothers me the most that at the moment the targeted people are Indians. ! Is it because we are at large a GOD fearing and honest to some extent people as a community?
Thank you so much for your post. Very helpful and very good of you.
Gia,
Glad it was helpful to you.
One of the attorney I spoke to recently mentioned that opt-out OVDP option has been removed based on June 2012 OVDP Guidance. Is this true?
I understand that it should be okay to do it by self. Assuming we are paying the required penalty amount(no output), I am wondering of the complexity in doing this by self Vs using an attorney and related info/forum/site like this..
For the smaller balances doing it by self should be ok.
For most of us with smaller balances, has anyone considered doing OVDP by self? Any forums, suggestions, pros/cons?
Can you provide reference of the attorney that filed your OVDI
Thanks
Ashu
Ashu,
Please refer my another post: Finding a tax attorney for OVDI
Thanks a lot for the information. I called almost all the lawyers in the list you provided and only one (William) gave me quote of 3K-5K and that also they told me that the FABRS’s and the amended returns have to be done by CPA. I am now pushed to the wall and if you can please share the name of the lawyer that you consulted ,i can talk to him.
Thanks
Ashu
Anshu: As a CPA i can tell you that filing out the FBAR form is not difficult.. If you have prepared your own prior year personal returns, that tells me that you may have some level of competency in doing the returns. Doing a 1040X by adding up the interest income and then computing the additional tax and interest and penalty is the way to go for the amended returns. When you file those, you need to pay for the additional tax interest and penalties. The FBAR penalty is paid at a latter stage. If you are not comfortable then you may seek professional help in getting the amended returns done. A point of caution. Do not forget to amend the state return as well, if you are in a state that has income taxes.