More Debits & Credits Posts

Indian Americans Ask for Leeway with Taxes on Foreign Bank Accounts

August 5, 2011

A group of Indian American organizations has written to President Obama, Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton asking for relief on penalties for failing to report foreign bank account holdings in India.

The Global Organization of People of Indian Origin, the National Federation of Indian American Associations, the American Association of Physicians of Indian Origin, and the Asian American Hotel Origins Association wrote a joint letter to Geithner in June and then to Obama last month asking for help, according to the Times of India.

In the latest letter, they reportedly said they recognized the need for the IRS to safeguard against funds flowing to terrorists, drug traffickers and money launderers. But they also asked that the IRS review the rules of its voluntary disclosure initiative to ensure they were applied prudently to taxpayers who may not have been aware of the foreign bank account disclosure rules. They warned that those were not aware of the laws might suffer undue distress.

The IRS’s current and past voluntary disclosure initiatives aim to encourage taxpayers to come forward and reveal their foreign bank account holdings, but the groups noted that the IRS’s 2009 initiative was not generally known to many people in India. The penalties have been stiffened under the latest program.

The deadline for the latest voluntary disclosure initiative ends on Aug. 31. The IRS has been seeking the names of U.S.-based clients of HSBC India through a John Doe summons, similar to the kind used to elicit names from UBS of its Swiss banking clients in the U.S. (see DOJ and IRS Seek HSBC India Account Records).

It would be unusual for President Obama to intervene with the IRS in such a case, but the groups hope to attract high-level attention to their plight.

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