According to the indictment, Dr. Ahuja, a board-certified neurosurgeon, wire transferred and maintained millions of dollars in bank accounts in India and the Bailiwick of Jersey at The Hongkong and Shanghai Banking Corporation Ltd. (HSBC).  In 2009, the HSBC bank account in India had a balance of $8,733,785.   The indictment alleges that Dr. Ahuja failed to report these bank accounts to the IRS on his 2006-2009 tax returns. The indictment further alleges that Dr. Ahuja failed to report more than $1.2 million in interest income that he earned from his HSBC India account and failed to pay the taxes due on that income.  For the 2006-2009 tax years, Dr. Ahuja also failed to file FBARs to report his foreign bank accounts to the Department of the Treasury.

As alleged in the indictment, U.S. citizens has an obligation to report to the IRS on Schedule B of their U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign county in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained.  They further have an obligation to report all income earned from foreign financial accounts on the tax return and to pay the taxes due on that income.  Separately, U.S. citizens with a financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year, must also file an FBAR form with the Department of the Treasury disclosing such an account by June 30 of the following year.

Each false tax return charge carries a maximum penalty of three years in prison and a $250,000 fine. The failure to file FBAR charges each carry a maximum penalty of 10 years in prison and a $500,000 fine.

The IRS currently is offering taxpayers with undisclosed income from offshore accounts the opportunity to participate in a new, voluntary disclosure initiative in order to get current on their tax returns and reporting requirements.  The 2011 Offshore Voluntary Disclosure Initiative (OVDI) will be available only through August 21, 2011.

If you have any questions regarding an offshore account and/or the IRS 2011 OVDI, please contact a former IRS tax attorney at Holtz, Slavett & Drabkin at (310) 550-6200.

In its request, the GOPIO said the recent decision of the IRS in the 2011 Offshore Voluntary Disclosure Initiative (OVDI) to impose 20% penalty on undeclared taxes and a 25% FBAR penalty on the highest balance between 2003 and 2010 is causing inconvenience to Indian-Americans.    The GOPIO asserted there was no deliberate intention by Indian-Americans to avoid taxes on the interest earned during the process of acquiring a home, apartment, supporting family or children’s education.

The organization urged the 2011 OVDI penalties of 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.

You can read the entire article by clicking on the following link:

http://www.thehindubusinessline.com/industry-and-economy/economy/article2144084.ece

If you have questions regarding the IRS’ 2011 Offshore Voluntary Disclosure Initiative, please call a Former IRS Tax Attorney at Holtz, Slavett & Drabkin at (310) 550-6200.

David C. Holtz, J.D., LL.M., Former IRS Attorney

On July 9, 2009, the California State Board of Equalization (“SBE”) announced that it is proposing a change to it’s position regarding sales to mixed Indian couples.  In particular, the SBE’s proposed new position is that sales to married couples (and domestic partnerships) which consist of both an Indian spouse and an non-Indian spouse will now be considered 100% exempt from sales tax if they otherwise meet exempt requirements.

The SBE proposal  revises its previous position reflected in law annotation 305.0013 that sales to mixed Indian/Non-Indian couples are only 50% exempt from California sales tax. 

Background:  Pursuant to California Sales and Use Tax Regulation 1616, the following sales of tangible personal property (such as an automobile) involving Indians are generally exempt from California sales taxes:

1. Sales by Indians retailers to Indians who reside on a reservation are exempt where the sale is negotiated at a place of business located on reservation and the property is delivered to the purchaser on a reservation.
2. Sales by Indian retailers to non-Indians who do not reside on reservation are exempt where the sale is negotiated at a place of business located on reservation and the property is delivered to the purchaser on a reservation.
3. Sales by non-Indian retailers to Indians who reside on reservation are exempt where the sale is negotiated at a place of business on reservation and the property is delivered to the purchaser on a reservation.

In applying this regulation, the SBE’s previous position was that sales to a mixed Indian/Non-Indian couples that otherwise meet the above requirements are only 50% exempt from California Sales Tax on the basis that the non-Indian spouse owns ½ of the interest in the purchased property, and, thus, the non-Indian interest should not be viewed as an exempt sale related to an Indian. 

The SBE has amended its position proposing a change to the legal annotations by replacing law annotation 305.0013 with law annotation 305.0019.100 providing the following:

Indian and Non-Indian Couples. Provided that all the other requirements for exemption are met under Regulation 1616, sales to couples involving Indians who have entered into officially recognized family relationships under either California law (i.e., a marriage or a domestic partnership under the Domestic Partner Rights and Responsibilities Act of 2003) or duly enacted tribal law should receive the same tax treatment regardless of whether the Indians have formed legal unions with Indians or non-Indians. Under such circumstances, neither the half-interest in the property attributable to the non-Indian nor the half-interest attributable to the Indian is subject to tax.

Legal Material:

California Sales and Use Tax Regulation § 1616.

Current Legal Digest (CLD) Number 1077 (July 9, 2009).

Law Annotation 305.0013 (April 30, 1981).

Other Helpful Material:

SBE Publication 146, Tax Tips for Sales to American Indians and Sales on Indian Reservations (August 2008).

Author:  David C. Holtz. 

If you have any questions, please call (310) 550-6200.

Copyright © David C. Holtz 2009.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts of text and links may be used, provided that full and clear credit is given to David C. Holtz with appropriate and specific direction to the original content at www.HSDTaxLaw.com.