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Contact:
Christine Bucan
Pantín/Beber Silverstein Public Relations
305-929-9723 or christine@thinkbsg.com
Deadline for foreign taxpayers nears
By MONICA HATCHER
For employees of foreign governments working in the United States, the deadline to enter into an IRS
settlement for unpaid or underpaid taxes is fast approaching. Employees at some 60 consular and 20
foreign trade offices in South Florida could be eligible to participate.
Workers at foreign embassies, consular offices and other international organizations nationwide have
until March 30 to notify the IRS of their intention to comply with the settlement terms, which include
paying taxes owed for 2003, 2004 and 2005.
Original and corrected tax returns aren't due until April 30.
The IRS estimated that nearly half of such employees either claimed deductions they shouldn't have,
failed to pay the proper tax amount due or failed to file tax returns at all. Others may have taken
deductions on contributions to IRAs and Simplified Employee Pension plans that were incorrectly
established.
"The most common problem I've seen is people who have not paid U.S. tax on their income," said
Benjamin Bohlmann, a tax partner with Miami-based accounting firm Mallah Furman, which has
been conducting an outreach effort to South Florida's diplomatic corps.
"They had the mistaken belief that wages paid to them by a foreign government were not subject to
tax, and that is incorrect," Bohlmann said.
Foreign governments are not required to withhold taxes for Medicare or Social Security, or report
wages to the IRS. As a result, many do not provide their U.S.-based employees with W-2 forms,
adding to the confusion.
Announced last year, the settlement initiative sent a shockwave through the diplomatic community
when many employees learned for the first time they were subject to the same U.S. tax rates as other
workers.
"Somebody in a professional position who has not reported their wages for their job for three years is
going to face a lot of taxes," Bohlmann said.
The settlement caps the number of years for the payment of back-taxes to three. It also imposes an
interest charge of about 5 percent on money owed. In addition, a penalty will be assessed on the year
with the highest inaccuracy.
Facing diplomatic pressure, the IRS extended an original deadline of Feb. 20 to March 30 to allow
more people to come forward. In doing so, taxpayers could potentially avoid full-scale audits of more
than three years as well as stiff penalties.
About Mallah Furman:
Established in 1960, Mallah Furman now ranks as the 9th largest accounting firm in South Florida. The Firm provides strategic financial services to South Florida businesses in a broad spectrum of industries. For more information, please visit the Firm's website at www.mallahfurman.com.
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