The Hidden Tax Risk No One Warns You About
Many Indian-Americans working in the U.S. have bank accounts, fixed deposits, mutual funds, or properties in India but fail to report them on required U.S. tax disclosures such as FBAR or FATCA (Form 8938).
Even when working with a CPA or tax preparer, foreign income and asset disclosures are often overlooked exposing taxpayers to penalties ranging from $10,000 to $100,000+.
The good news: if your failure was non-willful, the IRS offers the Streamlined Filing Compliance Procedures, a pathway to resolve your missed filings without criminal exposure.
At Kewal Krishan & Co, we help Indian-Americans bring their filings into compliance and avoid severe IRS penalties, securing peace of mind.
What Are FBAR and FATCA Reporting Requirements?
Per the Bank Secrecy Act and IRC §6038D, U.S. tax residents must disclose their foreign financial accounts and assets if they cross certain thresholds.
FBAR (FinCEN 114):
- Mandatory if total balance across all foreign accounts exceeds $10,000 at any time during the year.
- Includes NRO/NRE accounts, mutual funds, FDs, PPFs, etc.
FATCA (Form 8938):
- Threshold for U.S. residents:
- $50,000 (single filers)
- $100,000 (married filing jointly)
Penalties for non-filing are severe, even if you filed your regular tax return on time.
What Is the IRS Streamlined Filing Procedure?
A special IRS program for taxpayers who:
- Failed to file FBARs or FATCA (Form 8938)
- Were non-willful (i.e., unaware, misinformed)
- Want to voluntarily correct their tax filings
Two Variants:
| Version | Eligibility | Penalty |
|---|---|---|
| Foreign Offshore | Non-U.S. residents | 0% |
| Domestic Offshore | U.S. residents (includes most Indian-Americans) | 5% of high account value |
What Needs to Be Filed?
To qualify under the streamlined program, the following are required:
| Form | Description |
|---|---|
| Form 1040X (3 years) | Amend returns to report Indian income (interest, dividends, rent, capital gains) |
| FinCEN Form 114 (6 years) | FBARs for foreign account balances |
| Form 8938 | FATCA disclosures, if thresholds met |
| Form 14654 | Certification of non-willfulness |
Example: Missed Indian Income + FBAR Filing
Ravi, an H-1B software engineer in California, had:
- ₹15 lakh in NRO FDs
- ₹10 lakh in mutual funds
- Missed FBAR and 8938 filings for 2021 2023
We helped Ravi:
- Amend 1040s with ₹2.8 lakh interest income
- File 6 years of FBARs
- File 3 years of Form 8938
- Sign Form 14654 for Streamlined Domestic Offshore
- Pay 5% penalty on highest aggregate ($1,500)
Now, Ravi is fully compliant and protected from future IRS penalties or audits.
Step-by-Step: IRS Streamlined Compliance Process
Step 1: Confirm Eligibility
- U.S. tax resident (green card, visa, or substantial presence)
- Missed FBAR/Form 8938
- Non-willful failure to report
Step 2: Collect Indian Financial Info
- NRO/NRE bank statements
- Mutual fund balances
- TDS certificates, interest income, dividends
Step 3: Amend 3 Years of Returns
- File Form 1040X with correct Indian income
- Use Form 1116 for Foreign Tax Credit
Step 4: File 6 FBARs
- Via FinCEN’s BSA portal
Step 5: File FATCA Forms
- Form 8938 if thresholds exceeded
Step 6: Sign & Attach Form 14654
- Certify your conduct was non-willful
Step 7: Submit to IRS
- Mail entire package to IRS Austin address (for U.S. residents)
- Include check for 5% penalty
Conclusion
Indian-Americans who have unintentionally missed FBAR, FATCA, or Indian income disclosures still have a way out. The IRS Streamlined Filing Procedure offers relief but the window to act is limited.
At Kewal Krishan & Co, we ensure your entire filing is handled professionally, audit-proof, and penalty-safe.
Call to Action
Work with Anshul Goyal, CPA EA FCA, a licensed U.S. CPA, IRS-authorized Enrolled Agent, and cross-border tax specialist. He assists Indian taxpayers in resolving past non-compliance, filing FBAR, FATCA, and Indian income under Streamlined Procedure, and managing complex IRS representations.
About Our CPA
Anshul Goyal is a U.S. Certified Public Accountant, Enrolled Agent authorized to practice before the IRS, and an Indian Chartered Accountant. He specializes in cross-border tax planning, U.S. India treaty application, FBAR/FATCA compliance, and international disclosures for Indian taxpayers residing in or outside the U.S.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. The IRS requirements for FBAR and FATCA vary based on individual circumstances. Please consult a qualified tax professional before acting on this information.
Top 5 FAQs on IRS Streamlined Procedure
1. What is the penalty for missed FBAR filings?
Penalties can go up to $10,000 per account per year. Streamlined Filing caps this to 5% if you qualify.
2. Can I file FATCA and FBAR late without amending 1040?
No. The streamlined procedure requires you to amend 3 years of 1040 returns to include foreign income.
3. Does Indian TDS help reduce U.S. taxes?
Yes. Use Form 1116 to claim Foreign Tax Credit against TDS deducted on FDs, dividends, etc.
4. How do I know if I was “non-willful”?
Non-willful means your failure was due to lack of knowledge, CPA error, or oversight not intentional evasion.
5. Can I fix this myself?
You may technically be able to, but due to legal exposure, it is highly recommended to work with a qualified tax expert.