U.S. TAX GUIDE IN INDIA
How to handle five years of unfiled US taxes while living in India
The IRS Streamlined Filing Compliance Procedures are designed to help US citizens and Green Card holders in India who have fallen behind on their US tax filings.
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If you haven’t filed US taxes for several years, this program can help you get back on track without facing heavy penalties. The streamlined process is available to individuals whose failure to file was non-willful, meaning it happened due to confusion or a lack of knowledge rather than intentional tax avoidance.
How many years of taxes do you need to file under the Streamlined Program?
To qualify for the Streamlined Filing Compliance Procedures, you are required to file the last three years of US tax returns and submit six years of FBARs (Foreign Bank Account Reports).
If you owe back taxes, you will need to pay these along with any interest accrued. However, the streamlined program offers relief by waiving all penalties typically associated with late filings and unreported foreign accounts.
Do you need to file older tax returns beyond the three required years?
A key advantage of the streamlined program is that it allows you to achieve compliance without filing tax returns for every year you missed.
Once the IRS accepts your submission, you won’t need to go back and file returns for the years prior to the three most recent ones.
Will you be penalized for late filing under the Streamlined Program?
No, if you are accepted into the Streamlined Filing Program, you won’t face penalties for failing to file your tax returns or FBARs on time.
This program waives all penalties, although you will still need to pay any taxes owed along with interest. The IRS understands that many individuals simply didn’t know they needed to file.
Who can qualify for the IRS Streamlined Program?
To be eligible for the streamlined filing procedures, you need to meet a few specific requirements:
- Non-willful failure: You must prove that your failure to file was not on purpose. It should be due to a misunderstanding or lack of awareness.
- Residency requirement: You must have lived outside of the United States for at least 330 days during one of the last three years covered by your filing.
- No prior IRS contact: If the IRS has already contacted you about unfiled taxes, you won’t qualify for this program.
How do you get started with the Streamlined Filing Program?
The first step in the streamlined process is gathering your financial records for the past three years.
You’ll also need records for filing FBARs for the last six years. To apply, you must fill out Form 14653, which is used to certify that your failure to file was not intentional.
Working with a tax professional can make the process much easier. Someone experienced in both US and Indian tax systems can ensure that all documents are prepared correctly, saving you time and reducing errors.
What are the benefits of the Streamlined Filing Program?
- No penalties: You will not face penalties for failing to file taxes or FBARs.
- Limited requirements: You only need to submit three years of tax returns and six years of FBARs, rather than all the years you’ve missed.
- Peace of mind: Once your application is approved, you can start fresh without worrying about older unfiled tax years.
What should US expats know about FBAR requirements under the Streamlined Program?
If you have financial accounts in India with a combined value exceeding US$10,000 at any point during the year, you are required to file an FBAR.
Under the streamlined program, you must submit FBARs for the last six years. This includes all types of accounts—such as savings, investment, or pension accounts—that are based outside the United States.
The streamlined program waives the penalties for not filing FBARs on time. However, you are still responsible for paying any taxes owed on income from these accounts.
What if you don’t qualify for the Streamlined Program?
If you don’t meet the qualifications for the streamlined program, there are other ways to get back on track with the IRS. Programs like the Delinquent FBAR Submission Procedures or the Offshore Voluntary Disclosure Program (OVDP) could be options.
While these programs may involve paying penalties, they can still help you address your unfiled taxes and settle your account with the IRS.
If you’re not sure which program is best for you, it’s wise to speak with a tax expert. They can help you weigh your options and guide you through the most appropriate path for your situation.
What happens if the IRS has already contacted you about unfiled taxes?
If the IRS has reached out to you about your unfiled tax returns, you may not be eligible for the streamlined program.
Instead, you will need to work directly with the IRS.
This may mean negotiating a payment plan or addressing any penalties that apply to your situation.