Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

October 15, 2009 Deadline for Voluntary Disclosure

United States citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, U.S. citizens much file an F-Bar with the United States Treasury, disclosing any financial account in a foreign country with assets in excess of $10,000 for which they have a financial interest in or signature authority, or other authority over.

The IRS is offering an amnesty program for offshore account holders. In general, the amnesty program offers the opportunity to avoid criminal felony tax charges if the taxpayer discloses the foreign bank account information along with additional information via a specific Voluntary Disclosure program. The deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts is October 15, 2009. The IRS has announced that there will be no further extensions.

Those taxpayers who do not voluntarily disclose their hidden accounts by this deadline face much harsher civil penalties, where applicable, and possible criminal prosecution .

The U.S. Department of Justice is actively pursuing offshore account holders and has already begun criminally prosecuting taxpayers for failing to report offshore accounts and tax evasion. So far, the government has secured six guilty pleas in its effort, including one on Friday, where a New Jersey man pleaded guilty for failing to report about $6.1 million he had held in a UBS AG Swiss bank account.

We expect that the U.S. Department of Justice will publicize foreign bank account tax evasion prosecutions cases in an effort to encourage account holders to come forward.

We urge you to schedule an appointment with our office immediately if you believe you are subject to Foreign Bank Account reporting provisions.

New California Use Tax Collection Strategy

In a September 8, 2009 press release, the California State Board of Equalization announced its new use tax registration requirements in an effort to identify taxpayers that have been failing to pay use tax to the State. This effort is anticipated to bring in $183 million of previously uncollected use tax.

This use tax, required by law since 1935, is the same rate for any California location as the sales tax rate. California use tax is generally owed when individuals or businesses use, consume, give away, or store tangible personal property (i.e., products you can see, weigh, feel or touch, such as clothing, books, computers, DVDs, etc) in California that you purchased from an out of state vendor, where said vendor did not collect the California tax.

Businesses with gross receipts of $100,000 or more per year are now required to register and report and pay use tax. Use tax returns are required to be filed by April 15 of each year, reporting all purchases subject to use tax from the previous calendar year. The BOE has identified nearly 200,000 businesses that are required to register.

Our office expects that the State will also use the registration requirements as part of an effort to collect use tax from prior years. We are already seeing the state audit the past three to eight years or more to extract this tax from prior purchases. If you believe you may be subject to the reporting requirements and/or have not paid use tax according to the law, please contact our office immediately.