r2i forum

Hi,

Request experienced members to please clarify and advise me.

I came to US in 2012 and have been filing all my taxes in India(for Indian income) and US(for US income). I have no intention of settling here and plan to go back in 2-3 years. I am really in a big dilema as what to do. Request you to pls advise
I have 3 years of non filing of FBARS(less than 50k every year and some income(less than 2.5k every year which is mainly interest from savings account and ppf)
Recently IRS published, FBAR mitigation guidelines. Haven?t seen many people discussing it in general but its right there in IRS website ( https://www.irs.gov/irm/part4/irm_04-026-016.html#d0e1614 ).
It categorizes the penalty based on offshore balance as well as willful/non wilfull (>50k, 50 ? 250k and 250 and beyond).
The penalties are considerably less even for wilful violation (not like the draconian as per the original FBAR).


1.) Are they binding if the eligibility criteria are satisfied?


2.) Are they even applicable if there?s some unreported income for the years FBAR was not filed. I am planning to file my FBAR and report all income starting this year, so that in worst case my exposure is only limited to 3 years. If there?s an audit for past years, Will this mitigation guideline still apply to me ?



3.) That would you advice someone in my position considering that I will go back in max 3 years. I dont want to get on OVDI and pay 27% penalty on my life savings, most of which were made without any relation to USA (the unpaid tax on reported income is will prob be under 400$ per year).
Is going forward strategy ok?

4.) I am really confused about reporting PPF and EPF as many tax consultants told me that its not required where as some are telling me it is. For EPF its really difficult to find out how much the balance is, after employer contribution and interest accumulation over the years. I resigned onsite this year and its extremely difficult to get the balance from employer. I thought of withdrawing or transfer to a new employer once I return home.
I am thinking that I will look at all my payslips for my portion of epf , then double it for accounting employer?s contribution and add a simple interest at a conservative 13%pa. I guess in actual the epf interest is compounded daily (or may be monthly) at an annual rate of arnd 9.5%. I am hoping calculating simple interest at 13% should make it safely above what it actually is

5.)Is gratuity also considered as reportable income. I resigned and my employer in India payed out the Gratuity but it?s tax free since i was employed for more than 5 years


6.) For Mutual funds, can you let me know till what level the accounts needs to be broken for FBAR. E.g. everything is consolidated under a CAMS account. Withing that I have mf of multiple amc(like dsp blackrock, kotak). With each AMC i have multiple folio. IS each folio has to be reported as an account. Can i consolidate it at the level of Mutual find (like kotak)? or may be report a single account under CAMS

7.)The same question for shares. Does share of every company needs to be reported as an account?

8.)For mutual funds and shares, I read somewhere that its ok to report the valuation as of last day of the year for FBAR. In your knowledge is it true? Because of multiple SIPS, its extremely difficult to find out the valuation everyday and find the highest (for bank accounts its relatively extremely easy).
To be safe should i just look at the valuation on last day of year and bump it up by 50% for FBAR reporting to ensure i dont under-report. The indian stock market corrected itself in the latter part of the year so I hope this should be safe for reporting requirement. I am really getting paranoid and none of the people I ask know the answer.


9.) For mutual funds, one way is MTM where tax has to be paid on notional gain as per the valuation at end of year. The other is excessive distribution method. I won't go into the details but my question is this- In case I didn't select anything(which is allowed) then the default is the last option ( excessive distribution method). Incase of an audit, Can i just say that there's no unreported income as in absence of any election the default is assumed to be the last option(note that I haven't sold any MF after coming to usa).
Now what if I go back to India and the then technically fall outside US taxation after one year. Obviously if i sell after this then there's no USA taxation.
Is this a loophole. I read in many places that when some gives citizenship or green card, there are provisions to deal with this and its assumed that all assets are sold at the date of renunciation. There's no such guidance for vast no of migrants who keep getting in/out of US tax jurisdiction bcs of 183 day rule. Read somewhere that a amendment is in process to apply the same to cases when tax residency ends on a given date.
Any view on these situation are dealt with

Lastly If I go back to India after 3 years and then get an audit, how likely will I be pursued. I mean will they really come after me because of non reporting of FBAR for 3 years (less than 50k) and some income (less than 2.5k). I am sure there are bigger fishes to pursue





Frankly,most of the tax consultants (including the one i used for two years) don?t know a thing. He down-rightly told me not to report india income to avoid taxes and when i told that i don?t paying a few 100 as tax rather than risk losing so much he said things like if foreign assets is are funded from usa money(after taxes) then its not required.
Thanks for your time and help


Thanks

ashishck;624359Hi,

Request experienced members to please clarify and advise me.

I came to US in 2012 and have been filing all my taxes in India(for Indian income) and US(for US income). I have no intention of settling here and plan to go back in 2-3 years. I am really in a big dilema as what to do. Request you to pls advise
I have 3 years of non filing of FBARS(less than 50k every year and some income(less than 2.5k every year which is mainly interest from savings account and ppf)
Recently IRS published, FBAR mitigation guidelines. Haven’t seen many people discussing it in general but its right there in IRS website ( https://www.irs.gov/irm/part4/irm_04-026-016.html#d0e1614 ).
It categorizes the penalty based on offshore balance as well as willful/non wilfull (>50k, 50 – 250k and 250 and beyond).
The penalties are considerably less even for wilful violation (not like the draconian as per the original FBAR).


1.) Are they binding if the eligibility criteria are satisfied?


2.) Are they even applicable if there’s some unreported income for the years FBAR was not filed. I am planning to file my FBAR and report all income starting this year, so that in worst case my exposure is only limited to 3 years. If there’s an audit for past years, Will this mitigation guideline still apply to me ?



3.) That would you advice someone in my position considering that I will go back in max 3 years. I dont want to get on OVDI and pay 27% penalty on my life savings, most of which were made without any relation to USA (the unpaid tax on reported income is will prob be under 400$ per year).
Is going forward strategy ok?

4.) I am really confused about reporting PPF and EPF as many tax consultants told me that its not required where as some are telling me it is. For EPF its really difficult to find out how much the balance is, after employer contribution and interest accumulation over the years. I resigned onsite this year and its extremely difficult to get the balance from employer. I thought of withdrawing or transfer to a new employer once I return home.
I am thinking that I will look at all my payslips for my portion of epf , then double it for accounting employer’s contribution and add a simple interest at a conservative 13%pa. I guess in actual the epf interest is compounded daily (or may be monthly) at an annual rate of arnd 9.5%. I am hoping calculating simple interest at 13% should make it safely above what it actually is

5.)Is gratuity also considered as reportable income. I resigned and my employer in India payed out the Gratuity but it’s tax free since i was employed for more than 5 years


6.) For Mutual funds, can you let me know till what level the accounts needs to be broken for FBAR. E.g. everything is consolidated under a CAMS account. Withing that I have mf of multiple amc(like dsp blackrock, kotak). With each AMC i have multiple folio. IS each folio has to be reported as an account. Can i consolidate it at the level of Mutual find (like kotak)? or may be report a single account under CAMS

7.)The same question for shares. Does share of every company needs to be reported as an account?

8.)For mutual funds and shares, I read somewhere that its ok to report the valuation as of last day of the year for FBAR. In your knowledge is it true? Because of multiple SIPS, its extremely difficult to find out the valuation everyday and find the highest (for bank accounts its relatively extremely easy).
To be safe should i just look at the valuation on last day of year and bump it up by 50% for FBAR reporting to ensure i dont under-report. The indian stock market corrected itself in the latter part of the year so I hope this should be safe for reporting requirement. I am really getting paranoid and none of the people I ask know the answer.


9.) For mutual funds, one way is MTM where tax has to be paid on notional gain as per the valuation at end of year. The other is excessive distribution method. I won't go into the details but my question is this- In case I didn't select anything(which is allowed) then the default is the last option ( excessive distribution method). Incase of an audit, Can i just say that there's no unreported income as in absence of any election the default is assumed to be the last option(note that I haven't sold any MF after coming to usa).
Now what if I go back to India and the then technically fall outside US taxation after one year. Obviously if i sell after this then there's no USA taxation.
Is this a loophole. I read in many places that when some gives citizenship or green card, there are provisions to deal with this and its assumed that all assets are sold at the date of renunciation. There's no such guidance for vast no of migrants who keep getting in/out of US tax jurisdiction bcs of 183 day rule. Read somewhere that a amendment is in process to apply the same to cases when tax residency ends on a given date.
Any view on these situation are dealt with

Lastly If I go back to India after 3 years and then get an audit, how likely will I be pursued. I mean will they really come after me because of non reporting of FBAR for 3 years (less than 50k) and some income (less than 2.5k). I am sure there are bigger fishes to pursue





Frankly,most of the tax consultants (including the one i used for two years) don’t know a thing. He down-rightly told me not to report india income to avoid taxes and when i told that i don’t paying a few 100 as tax rather than risk losing so much he said things like if foreign assets is are funded from usa money(after taxes) then its not required.
Thanks for your time and help


Thanks

Looks like you plan to file amended US tax returns to report your India-sourced income for the past years where you had not done so. If you had filed tax returns in India for those years, your income had obviously been higher than the threshold that requires a tax return filing. Convert the tax paid into US$ using the exchange rate that was in effect during those years. And then, make sure that you take credit for the foreign taxes paid in all your amended US tax returns. Perhaps this may cause your additional tax to be much less than you expect. Perhaps you may even get a refund. Google IRS website for "foreign tax credit", and do some reading about form 1116.

As for FBAR, you will find kindred souls in other tax-compliance heavy internet forums. I'd say file the darn FinCEN 114 for past years and be done with it.

In stressful times, you need a little laugh. Here is a feller with a bigger tax return, and he says he gets audited every darn year.


He would very likely have more than 25 foreign bank accounts. His wife probably has money in Slovenia.

Hi,
All your questions are really good and I am getting in the same boat. Did you figure out the answers to your questions?

thanks
kapil

Hi,
I also have the same questions. Were you able to get info on this?