August 31 Amnesty Deadline For Indian Bank Accounts: DOJ And IRS Pair Up To Target Indian Off-Shore Bank Accounts At HSBC

Anyone with an off-shore bank or brokerage account in India who has not yet reported the account on his or her tax return has until August 31, 2011 to take advantage of a U.S. government-sponsored amnesty program to remedy that situation. Those neglecting to take advantage of this opportunity prior to its deadline face possible criminal prosecution and the imposition of maximum monetary penalties, according to the program established by the IRS and the U.S. Department of Justice (DOJ).

Several years ago, the IRS and DOJ announced that they would pursue persons with off-shore bank accounts if those persons had not properly reported to the IRS the monies held in those accounts. The government's stated purpose was to get taxpayers located in the United States to subject off-shore monies to both U.S. tax reporting as well as taxation in the United States. As part of this initiative, the government offered an amnesty program. The key to the program was the avoidance of criminal and full civil penalties for those who came forward during the amnesty program. In order to benefit from the amnesty program, an account holder needed to voluntarily disclose the account information and other pertinent information before the IRS located the account and identified the account holder. The IRS and DOJ announced that if they found the person first, they would criminally prosecute the person plus seek the imposition of the maximum monetary penalties. The current amnesty program regarding bank and brokerage accounts held in India ends August 31, 2011.

By way of background, U.S. citizens and residents have 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 country 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 their tax return and to pay the taxes due on that income. Separately, U.S. citizens and residents with a financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year also must file an FBAR form with the Department of the Treasury disclosing such an account by June 30 of the following year. Failure to satisfy these obligations can subject the account-holder...