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July 8, 2011

California's New Voluntary Compliance Initiative Includes Unreported Foreign Income

California's Voluntary Compliance Initiative 2 will run from August 1, 2011 through October 31, 2011. It provides (for those who file amended returns and participate) for reduced penalties and can avoid criminal action by California for those who have participated in abusive tax avoidance transactions or offshore financial arrangements.

What is an offshore financial arrangement? 
An offshore financial arrangement (OFA) is any transaction designed to avoid or evade California income or  franchise tax through the use of: (a) offshore payment cards, including credit, debit, or charge cards issued  by banks in foreign jurisdictions, or (b) foreign banks, financial institutions, corporations, partnerships, trusts, or other entity.  This would include interest, dividends, capital gains, rental income, etc. that were not reported on your California tax return solely because those items were located or occurred in a offshore countries.

What is an abusive tax avoidance transaction?
Abusive tax avoidance transaction (ATAT) means a:  
• Tax shelter as defined under Internal Revenue Code (IRC) Section 6662(d)(2)(C)
• Reportable transaction as defined under IRC Section 6707A(c)(1) that is not adequately disclosed in
accordance with IRC Section 6664(d)(2)(A),
• Listed transaction as defined under IRC Section 6707A(c)(2),
• Gross misstatement within the meaning of IRC Section 6404(g)(2)(D), or
• Transaction to which the noneconomic substance transaction (NEST) penalty applies under Revenue and
Taxation Code (RTC) Section 19774.

Read More Here.  Let us help you amend your current and past returns and enter the program while there is still time to take advantage of its benefits.  

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