u.s. expat tax guide – india
What to do if you missed five years of US taxes in India?
The IRS Streamlined Filing Compliance Procedures help Green Card & US citizenship holders in India catch up on unfiled tax returns without facing penalties. If you’ve been living in India for years without filing US taxes, this program provides an easy way to become compliant without the fear of severe penalties.
It’s meant for those whose failure to file was non-willful—meaning it was due to misunderstanding or being unaware of the rules, not an attempt to avoid taxes.
How many years of tax returns do I need to file?
Under the streamlined program, you only need to file the most recent three years of US tax returns and six years of FBARs (Foreign Bank Account Reports).
This is a big relief compared to the daunting idea of having to file all the years you missed, especially if you’ve been living in India for a decade or more.
If you owe taxes, you will need to pay those back taxes along with any accrued interest. However, the streamlined program waives all penalties that would normally apply to late filings and missed FBAR reports.
What happens to the previous unfiled years?
One of the biggest advantages of the streamlined filing program is that it allows you to get back into compliance without having to file tax returns for every year that you missed.
Once the IRS accepts your submission under this program, you do not need to worry about the tax returns for years prior to the three you submitted. This provides a fresh start, allowing you to remain compliant going forward without the burden of addressing all the previous unfiled years.
Are there penalties for late filing?
No. If you qualify for the streamlined program, you will not face penalties for failing to file your tax returns or FBARs in prior years.
You’ll only need to pay the taxes you owe and any accrued interest. The interest rate for overdue taxes is generally low, making it easier for US citizens to catch up without a significant financial burden.
Who qualifies for the streamlined program?
To qualify, you must meet the following requirements:
- Non-Willful Conduct: You must certify that your failure to file was non-willful, meaning it was not an intentional act to avoid paying taxes.
- Residency Requirement: You must have been living outside the United States for at least 330 full days during one of the last three years for which you are filing.
- Missed Filing: You must not have previously been contacted by the IRS regarding your unfiled returns.
Many Green Card holders genuinely do not know that they need to file US taxes while living abroad, and the IRS recognizes this. The streamlined program is specifically designed for individuals who want to become compliant without facing severe measures.
How do I get started with the streamlined filing program?
To begin the streamlined filing process, you will need to gather your financial records for the past three years, along with the information needed to file FBARs for the past six years.
You will also need to complete Form 14653, which requires you to certify that your failure to file was not willful.
It is highly recommended to work with a tax professional who understands both US and Indian tax laws. This can help ensure your filings are accurate and complete; the streamlined filing process can be complex, and having an expert to guide you through it can make it far less stressful.
Is the streamlined filing program a good option for US citizens?
The streamlined program is an excellent way for US expats in India to catch up on their tax obligations without facing the fear of heavy penalties.
What are the benefits of using the streamlined filing program?
The streamlined filing program offers several benefits:
- Penalty Waivers: You will not face penalties for late filings or missed FBARs, which can otherwise be substantial.
- Limited Filing Requirement: You only need to file the last three years of tax returns and six years of FBARs, rather than all the years that you missed.
- Fresh Start: Once you are accepted into the program, you can start fresh with the IRS, without needing to worry about previous unfiled years.
- Reduced Stress: The program provides a straightforward way to become compliant, which reduces the anxiety associated with unfiled taxes.
What should I know about FBAR requirements under the streamlined program?
The FBAR (Foreign Bank Account Report) is required if you have foreign financial accounts with a combined total value exceeding US$10,000 at any point during the year. Under the streamlined filing program, you need to submit FBARs for the past six years.
This applies to all foreign financial accounts, such as savings accounts, investment accounts, and retirement accounts held in India.
Failing to file an FBAR can result in severe penalties, but these penalties are waived under the streamlined program. However, you will still need to pay any taxes due on the income generated from these accounts.
