The IRS has deployed a double prong approach under the Foreign Account Tax Compliance Act or FATCA:
1. Force foreign banking institutions, investment houses and sovereign tax authorities to provide information regarding US taxpayers accounts offshore, and
2. Force US taxpayers to disclose all holdings in offshore banks and investment houses, as well as assets that are owned or controlled abroad.
India is taking a cue from FATCA in search of their own form of unreported or “Black” money. It is a common practice in India to under-report income and hide cash from taxation authorities. This hidden money is often called “black” money. Many transactions in India, including business transactions and even the purchase of real estate are tainted by “black” money.
For example, if a good or service is purchased the actual price reported is much lower than the actual selling price, and the good is paid for with a small amount of “white” money (money that is reported and “on the books”) and a larger amount of “black” money.
The challenge for US businesses is how they report the sale for taxation purposes. The US business must account for the income, and report it to the IRS appropriately. Here’s the new wrinkle:
The IRS is providing India with information on US businesses and Individuals with business dealings in India.
This has made it much harder for India residents to hide money from taxation. While there are several strategies to find a new way to hide money from taxation for both Americans and Indians, the point is clear:
The world’s tax authorities are using an intimidating combination of legislation and technology to track money and transactions worldwide, and to close the noose on those who try to avoid paying taxes by secreting money and assets.
If you are concerned about an IRS audit, the September 30 deadline in India, or FATCA related FBAR reporting here in the US we invite you to contact us for a free consultation at 866-631-3470.
