Ascentis prides itself on the relationships with develop with our partners. Often, our partners have valuable information we wish to share with our reader base from our partners monthly newsletter. This month we bring you an article from the monthly newsletter of High Street Partners, an international business services firm which offers SaaS-enabled services that simplify the management and control of international operations. They also offer assistance with the implementation and ongoing management of international subsidiaries and other entities, providing entity set-up and registration(s), payroll, accounting, tax filing, HR assistance, and legal and tax compliance services.
In February, the IRS announced 2011 OVCI, its second Offshore Voluntary Compliance Initiative for taxpayers who did not meet the 2009 deadline for participation in the first disclosure program. The OVCI aims “to bring taxpayers that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws”.
While the terms outlined are not as favorable as those in the 2009 plan, the 2011 OVCI does include reduced penalties and the ability to avoid possible criminal sanction for those who comply with the filing process.
A little background (directly from the IRS Website): The IRS’s prior Offshore Voluntary Disclosure Program (2009 OVDP), which closed on October 15, 2009, demonstrated the value of a uniform penalty structure for taxpayers who came forward voluntarily and reported their previously undisclosed foreign accounts and assets. Not only did the initiative offer consistency and predictability to taxpayers in determining the amount of tax and penalties they faced, it also enabled the IRS to centralize the civil processing of offshore voluntary disclosures. Therefore, it was determined that a similar initiative should be available to the large number of taxpayers with offshore accounts and assets who applied to IRS Criminal Investigation’s traditional voluntary disclosure practice since the October 15 deadline.
Taxpayers have until August 31, 2011 to complete the proper paperwork and pay taxes, penalties and interest due under the terms of the 2011 initiative. Calendar year taxpayers must include tax years 2003 through 2010 in which they have undisclosed foreign accounts and/or undisclosed foreign entities. Fiscal year taxpayers must include fiscal years ending in calendar years 2003 through 2010 (i.e. tax years 2002 – 2009).
As a critical piece of the initiative is proper filing of a Report of Foreign Bank and Financial Accounts (FBAR), which discloses a financial interest or signatory authority over a foreign financial account, we have included further detail below:
FBAR Reporting Obligations
Under federal banking law, any US person with a financial interest in, or signature authority over, any financial account in a foreign country must file Form TD F 90-22.1 – Report of Foreign Bank and Financial Accounts (FBAR) if the value of the account exceeds $10,000 at any time during the calendar year.
U.S. citizens and residents must disclose an interest in a foreign financial account on Schedule B of their annual U.S. tax return in addition to filing an FBAR.
In late February, the U.S. Treasury Department released final regulations regarding FBAR filing obligations, applicable for Form TD F 90-22.1, which is due annually on or before June 30th for accounts maintained in calendar year 2010 and subsequent years. No extensions are available. The changes include clarifications on whether an account is “foreign”, the appropriate treatment of custodial accounts and foreign mutual funds, and the definition of signature or other authority. The rules also outline a financial interest in a trust context and rules for record maintenance for officers or employees who have signature or authority over the accounts. Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.
Founded in 2003 by Larry Harding, former VP of International Finance for Ciena Corporation, High Street Partners is headquartered in Annapolis, Maryland with additional U.S. offices in Boston, Atlanta, San Diego, San Francisco, and San Jose. They have a vast international presences, with locations in London, Tokyo, Shanghai and Hong Kong, regional specialists in many markets, and a network of local service providers around the globe.
