Review FBAR rules: Indian-Americans to Geithner

Review FBAR rules: Indian-Americans to Geithner

In its request GOPIO said the recent decision of the US Internal Revenue Services (IRS) to impose 20 per cent penalty on undeclared taxes and a 25 per cent FBAR penalty on the highest balance between 2003 and 2010 is causing inconvenience to Indian-Americans.

"Many people holding foreign bank accounts were unaware of these rules simply because these rules were never publicised by the IRS to the general public," New York-based GOPIO wrote in a letter to Geithner, which was submitted to him in Washington on Monday.

On February 8, the IRS had announced a new Voluntary Disclosure Program, which is a tax amnesty scheme for those holding income in foreign countries.

The law requires that anyone who is a US citizen or a permanent resident to disclose his or her foreign income.

In the tax amnesty Voluntary Disclosure Program, one has to declare the interest and rental income of the last eight years that is from 2003-2010.

The IRS has declared 20 per cent accuracy penalty on undeclared taxes and a 25 per cent Foreign Bank and Financial Accounts (FBAR) penalty on the highest balance between 2003 and 2010.

GOPIO asserted there was no deliberate intention by Indian-Americans to avoid taxes on interest earned during the process of acquiring home, apartment, supporting family or children's education.It urged the IRS to review and reconsider the rules towards more practical and prudent application. "We believe that universal application of the law should be on an equitable basis, on principle of fairness and in good conscience without undue burden to the US taxpayer.

"Strict application of compliance with the law on hard working Americans who are not aware of the law can lead to irreparable distress and unforeseeable consequences for a large number of innocent citizens who did not consciously or knowingly violate the rules."
GOPIO urged the Treasury Secretary that those who had less than USD 250,000 in their bank accounts any time between 2003 and 2010 should not be subjected to 25 per cent penalty, if they are qualified under the Voluntary Disclosure Program.

"In many cases, these hard working Americans had transferred locally taxed money to pay for their retirement homes or to support their families or for children’s education," it said.

The organisation urged the 20 per cent accuracy penalty on undeclared taxes and a 25 per cent FBAR penalty be substantially reduced for those who did not knowingly miss the filing deadlines. It also urged that the last date for voluntary disclosure to be extended to December 31, 2012.

The US government should publicise the Voluntary Disclosure Amnesty Program in ethnic newspapers and other community media in multiple languages as well as IRS representatives to be interviewed by print, radio and television media to bring about more awareness, it said.

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