IRS 2011 Amnesty for Foreign Account: A Welcome Act

Rich Indian Americans use HSBC tosquirrel money in India. Now theIRS has caught on and decided totake action.

Dr. Arvind Ahuja, a prominent Wisconsin-based Indian-American neurosurgeon,was recently indicted bya federal grand jury for not reporting to taxationauthorities about his bank account inHSBC’s India branch and the income generatedthereof.

Ahuja allegedly wire transferred andmaintained millions of dollars in bank accountsat the Hongkong and ShanghaiBanking Corporation Ltd (HSBC). In 2009,his HSBC bank account inIndia had a balance ofUSD 8,733,785.

He failed to report thesebank accounts to the InternalRevenue Service (IRS)on his 2006-2009 tax returnsbesides not reportingmore than $1.2 million ininterest income that heearned from his HSBCIndia account so as to notpay taxes due on that income.For the 2006-2009tax years, he also failed tofile the reports of ForeignBank and Financial Accounts(FBARs) to the Departmentof the Treasury.

Ahuja is not the firstsuch case to be uncoveredby the IRS. Earlier in January,NJ businessmanVaibhav Dahake was indictedfor conspiring withfive bankers of “one of thelargest international banks in the world,”primarily the HSBC. He was the first taxpayercharged in a crackdown focusing onwhether HSBC helped clients with Indianaccounts hide assets from the IRS.Dahake claimed that he was misled byHSBC that opening an account in India requiredno U.S. tax forms or social securitynumbers and that no tax was due India andthat no 1099’s would be filed with the IRS.

He was also told that he could obtain a debitcard allowing him to access his cash anonymouslyanywhere in the U.S. Just because abanker tells a customer that his accountwould not be reported to the IRS doesn’tmean the customer can’t be prosecuted.These two indictments may just be the tipof the iceberg. Many Indian Americans sendmoney home. Sending money to India isnot illegal. But it becomes so when UncleSam is kept in the dark. Besides, for U.S.residents -- Indian Americans and other nationalitiesalike -- not reporting a foreignbank account with at least $10,000 meansthe IRS can also seize half the account valueeven if there was no income derived fromit.

After the indictments of two Indian Americans,I wonder how we are perceived byothers. Also, isn’t it ironical that corrupt Indiansstash their ill-gotten gains in offshoreaccounts, primarily tax havens like Switzerland,and rich Indian Americans use HSBCto squirrel money to their bank accounts inIndia!

It seems that the IRShas caught on and decidedto take action!For, close on the heelsof these indictments,comes the news of theIRS reviving anamnesty program forpeople with unreportedforeign accounts. The2011 voluntary disclosureinitiative imposessomewhat higher penaltiesthan the prior voluntarydisclosureinitiative which endedin 2009, but still allowsqualifying participantsto obtain certaintyabout avoiding criminalprosecution.To qualify, individualswith foreign accountshave to discloseany unreported incomefrom 2003 on and payall taxes, interest and penalties due on theunderstatement. The initiative is currentlyset to expire on August 31, 2011.

We, as Indian Americans, and citizens ofthis great country have an obligation to reportto the IRS whether we have a financialinterest or signature authority over a financialaccount in a foreign country in a particularyear and also pay taxes due on incomederived from that account. It would do goodto remember that conspiracy to defraud theU.S. is a serious felony punishable by yearsin a federal prison. So, all good IndianAmericans now is the time to become transparent.Do not delay, the longer you wait,the worst penalties can get. We only haveuntil August 31, 2011.
- VRN