The Internal Revenue Service encouraged U.S.-based employees and former employees of foreign embassies, foreign consular offices and international organizations to participate in a one-time settlement initiative to resolve tax matters related to their employment.The offer is only open to U.S. citizens, green-card holders and foreign employees with a U.S. tax obligation. Accredited diplomatic personnel are generally exempt from income taxes on their wages under international treaties or agreements.

The IRS estimates that as many as half of the employees subject to U.S. tax either fail to report their wages, claim deductions they are not entitled to, incorrectly establish retirement plans, fail to pay self-employment tax, or fail to file tax returns at all.

The IRS settlement initiative for these employees will expire on Feb. 20, 2007. In order to participate in the initiative, employees must submit amended or original tax returns for the 2003-05 tax years properly reflecting their income and expenses.

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