The Department of Treasury has finally responded to a letter by a coalition of Indian-American organisations, led by the Global Organisation of People of Indian Origin (GOPIO), but reiterated the Internal Revenue Service warning that there will be no extension of the August 31, 2011, deadline for the Offshore Voluntary Disclosure Initiative.
"At this time, we do not contemplate granting an across-the-board deadline extension for all taxpayers. However, a specific taxpayer can request an extension of the deadline (up to 90 days) to complete his or her submission if the taxpayer can demonstrate a good faith attempt to fully comply with the OVDI requirements on or before August 31, 2011," the Treasury said in its reply.
"The request must be given in writing and must include a statement of the items that are missing, the reasons why, and the steps he or she is taking to secure them."
Dr Thomas Abraham, founder and former chairman, GOPIO, had handed over the letter to Treasury Secretary Timothy Geithner by GOPIO June 27, when he buttonholed the treasury secretary at the end of a town-hall-like forum the latter had participated in with visiting Indian Minister of Finance Pranab Mukherjee in Washington, DC.
The GOPIO had also urged for a reduction of the penalties the IRS had said it would impose on those who did not comply with the deadline.
In response to this plea, the Treasury said, 'The 2011 Offshore Voluntary Disclosure Initiative provides a way for taxpayers with undeclared assets offshore to resolve their tax problems,' and enumerated the terms of the penalties:
A 20 percent accuracy-related penalty under section 6662 of the Internal Revenue Code (Code), a failure-to-file penalty under section 6651 (a)(1) of the Code, a failure-to-pay penalty under section 6651 (a)(2) of the Code; and an offshore penalty equal to 25 percent of the highest aggregate balance in foreign bank accounts and entities or the value of foreign assets during the period covered by the voluntary disclosure in lieu of all other penalties that may apply, including foreign bank and financial accounts and offshore-related information return penalties.
Earlier this month, the IRS had said, 'US taxpayers hiding income in undisclosed offshore accounts are running out of time to take advantage of a soon-to-expire opportunity to come forward and get their taxes current with the Internal Revenue Service. The 2011 Offshore Voluntary Disclosure Initiative will expire on August 31, 2011.'
The Indian American community organisations were disappointed by the Treasury response.
The four organisations - GOPIO, the National Federation of Indian American Associations, the American Association of Physicians of Indian Origin and Asian American Hotel Owners Association - wrote to Geithner, and followed up with similar letters to President Barack Obama and Secretary of State Hillary Clinton.
These organisations were also joined by the Federation of Indian Community Association of Cleveland and the Federation of Indian Associations of New York, New Jersey and Connecticut.
They have advised the community to highlight how most Indians were unaware of these rules governing foreign account disclosure and how they believed that because they were paying taxes in India, they were in compliance of the rules.
The coordination groups have also asked Indian Americans to suggest a more discrete IRS approach combined with wider reach into the new immigrant community will lead to greater compliance under the disclosure scheme.
