The HSBC Bank, which is at the core of a U.S. crackdown on offshore tax evasion, has alerted its clients having an account in India, including Indian Americans, to consult a tax advisor after it received summons from Internal Revenue Service (IRS) seeking its account- holders’ names.
“In the interest of our customers, we would like to highlight that if you have any concerns about your U.S. tax reporting relating to your HSBC India account(s), you should consider consulting with a U.S. tax advisor to determine the appropriate course of action,” said Sanjay Nair, head customer propositions, retail banking and wealth management, HSBC in a letter to its customers.
HSBC in its letter, informed its American clients having bank account in HSBC India that the IRS has served a summons on the bank seeking information with regard to financial accounts of U.S. persons maintained with its branches in India.
“While we haven’t seen the letter HSBC sent to its clients, we’ve reviewed excerpts and it confirms what we’ve known all along: the IRS and other law enforcement officials will pursue action against non-compliant tax filers aggressively,” Wayne Holton, a CPA with the accounting firm Citrin Cooperman, told PTI.
“Indian-Americans with overseas accounts through HSBC should make the assumption that the bank will be cooperating with the IRS, which issued a summons asking for names of account holders,” Holton said, adding that individuals with foreign accounts at HSBC India need to be working with tax professionals to become compliant before the August 31 deadline for voluntary disclosure.
Holton recommended that if U.S. residents, green card holders or resident aliens have foreign bank accounts that have a highest value in excess of U.S.D 10,000 in any year from 2003-2010, they should consider entering into the IRS Offshore Voluntary Disclosure Initiative prior to the August 31 deadline.
HSBC in its letter told its customers that if they have concerns about their U.S. tax reporting, they need to be aware of an IRS voluntary disclosure programme, which encourages U.S. taxpayers to bring themselves voluntarily into compliance with the U.S. tax laws.
“According to the IRS, voluntary disclosure enables taxpayers to become compliant and avoid substantial civil penalties, and generally eliminates the risk of criminal prosecution,” Nair said.
As part of this voluntary disclosure practice, on February 8, 2011, the IRS announced an “Offshore Voluntary Disclosure Initiative” or “OVDI” which includes a special penalty framework applicable to voluntary disclosures regarding unreported offshore accounts and entities, it said.
According to the IRS, the OVDI offers greater certainty regarding the applicable penalty structure and is designed to encourage U.S. taxpayers with offshore assets to take advantage of the IRS’s voluntary disclosure practice, the HSBC letter said.