The Hidden Tax Risk No One Warns You About
Many Indian-Americans working in the U.S. hold bank accounts, fixed deposits, mutual funds, or properties in India but fail to disclose them on required U.S. filings such as FBAR or FATCA (Form 8938).
Even when a CPA prepares the return, these foreign asset disclosures are often missed exposing taxpayers to civil penalties of $10,000 to over $100,000 per account per year.
The good news: if your failure was non-willful, the IRS allows you to fix past mistakes through the Streamlined Filing Compliance Procedures, a relief program that removes criminal exposure and limits penalties.
At Kewal Krishan & Co, we help Indian-Americans regularize missed filings, protect themselves from IRS penalties, and regain complete compliance peace of mind.
What Are FBAR and FATCA Reporting Requirements?
Under the Bank Secrecy Act (31 U.S.C. § 5314) and Internal Revenue Code § 6038D, every U.S. tax resident must disclose foreign financial accounts and specified foreign assets if they exceed prescribed thresholds.
FBAR (FinCEN Form 114)
- Who files: U.S. citizens, green-card holders, and residents under the substantial-presence test.
- Threshold: Aggregate value of all foreign accounts exceeds $10,000 at any time during the year.
- Covers: NRO/NRE accounts, mutual funds, FDs, PPFs, Demat accounts, and foreign brokerage holdings.
FATCA (Form 8938)
| Taxpayer Category | Status | Threshold on Last Day of Tax Year | Threshold at Any Time During Year |
U.S. Residents (Living in the U.S.) | Unmarried | > $50,000 | > $75,000 |
| Married Filing Jointly | > $100,000 | > $150,000 | |
| Married Filing Separately | > $50,000 | > $75,000 | |
Taxpayers Living Outside the U.S. (Foreign Residents) | Unmarried | > $200,000 | > $300,000 |
| Married Filing Jointly | > $400,000 | > $600,000 | |
| Married Filing Separately | > $200,000 | > $300,000 |
Failing to file either report even if your income tax return was filed on time can trigger severe penalties.
IRS Streamlined Filing Compliance Procedures
A special IRS program designed for taxpayers who:
- Failed to file FBARs or FATCA forms;
- Were non-willful meaning the omission was due to negligence, oversight, or misunderstanding, not intent to evade; and
- Want to voluntarily correct their past filings.
Two Variants of Streamlined Filing
| Version | Eligible Taxpayers | Penalty |
| Foreign Offshore | Non-U.S. residents (e.g., citizens living abroad and qualifying under bona fide or physical presence test) | 0% |
| Domestic Offshore | U.S. residents (most Indian-Americans in the U.S.) | 5% of highest aggregate balance of undisclosed foreign assets |
Eligibility Criteria for Streamlined Filing
To qualify for the Streamlined Filing Compliance Procedures, you must meet all of the following:
- U.S. Tax Compliance Status:
You must have previously filed U.S. tax returns for the covered years (even if incomplete or missing foreign income). - Non-Willful Conduct:
Your failure to report foreign assets or income must be non-willful that is, due to inadvertence, negligence, mistake, or good-faith misunderstanding of the law. - No IRS Examination or Criminal Investigation:
You cannot be under any civil or criminal IRS examination for any tax year. - Residency Determination:
- For Domestic Streamlined, you meet the substantial presence test or hold a U.S. green card during any of the covered years.
- For Foreign Streamlined, you have resided outside the U.S. for at least 330 full days in one of the three covered years.
- Certify Non-Willfulness (Form 14654 / 14653):
You must sign a sworn statement explaining why the failure was non-willful and include it with your submission. - Willingness to Pay the 5% Penalty (Domestic version):
The penalty applies to the highest aggregate balance of all non-compliant accounts during the six-year FBAR period.
What Needs to Be Filed
| Form | Description |
| Form 1040X (3 years) | Amended U.S. tax returns reporting all Indian income (interest, dividends, rent, capital gains). |
| FinCEN Form 114 (6 years) | FBARs showing foreign account balances. |
| Form 8938 | FATCA disclosures if asset thresholds are met. |
| Form 14654 / 14653 | Certification of non-willfulness under Domestic / Foreign version. |
Example: Missed Indian Income + FBAR Filing
Ravi, an H-1B software engineer in California, had:
- ₹15 lakh in NRO fixed deposits
- ₹10 lakh in mutual funds
He missed FBAR and Form 8938 filings for 2021–2023.
Our assistance at Kewal Krishan & Co:
- Amended 1040s with ₹2.8 lakh interest income
- Filed 6 years of FBARs and 3 years of FATCA forms
- Completed Form 14654 certification
- Paid a 5% penalty (~$1,500) on highest aggregate balance
Ravi is now fully compliant and immune from future IRS penalties.
Step-by-Step: How the IRS Streamlined Process Works
Step 1 – Confirm Eligibility
Ensure you are a U.S. tax resident, missed FBAR/Form 8938, and acted non-willfully.
Step 2 – Collect Indian Financial Data
Gather NRO/NRE statements, FD interest certificates, TDS details, and mutual fund balances.
Step 3 – Amend 3 Years of Returns
File Form 1040X for each year, report Indian income, and claim Foreign Tax Credit (Form 1116).
Step 4 – File 6 Years of FBARs
Electronically through FinCEN’s BSA E-Filing System.
Step 5 – File FATCA Forms
Attach Form 8938 to amended returns if thresholds are met.
Step 6 – Sign and Attach Form 14654**
Certify non-willfulness with explanation.
Step 7 – Submit to the IRS
Mail the complete Streamlined package with check for 5% penalty to the IRS Austin, TX address.
Why Act Now
The IRS reserves the right to terminate the Streamlined program at any time. Once withdrawn, taxpayers must use the costlier Voluntary Disclosure Practice with higher penalties and possible criminal risk.
Taking action now protects you from retroactive enforcement.
Conclusion
Indian-Americans who unintentionally failed to report Indian accounts or income can still make things right. The Streamlined Filing Compliance Procedures provide a legitimate, penalty-limited path to get back in good standing with the IRS.
At Kewal Krishan & Co, we ensure your filings are complete, audit-ready, and penalty-safe.
Call to Action
Work with Anshul Goyal, CPA EA FCA U.S. Certified Public Accountant, IRS-authorized Enrolled Agent, and Indian Chartered Accountant specializing in cross-border taxation for Indian residents and expats.
He assists Indian taxpayers in resolving FBAR/FATCA non-compliance, Streamlined submissions, and complex IRS representation cases.
About Our CPA
Anshul Goyal, CPA EA FCA is a U.S. Certified Public Accountant, Enrolled Agent authorized before the IRS, and Indian Chartered Accountant.
He focuses on cross-border tax planning, U.S.–India treaty analysis, FBAR/FATCA compliance, and international disclosures for Indian-origin taxpayers worldwide.
Disclaimer
This article is for informational purposes only and does not constitute legal or tax advice. IRS rules vary based on individual facts and residency. Always consult a qualified tax professional before filing under the Streamlined Procedures.
Top 5 FAQs on IRS Streamlined Procedure
- What penalty applies for missed FBARs?
Non-willful penalties may reach $10,000 per account per year. The Streamlined program limits it to 5% of the highest balance if you qualify. - Can I file late FBARs/FATCA without amending 1040?
No. You must amend three years of 1040 returns to include foreign income. - Does Indian TDS reduce U.S. tax?
Yes, Claim credit through Form 1116 (Foreign Tax Credit). - How do I prove non-willfulness?
Provide a credible written explanation: reliance on CPA, lack of awareness, or misunderstanding not intentional evasion. - Can I self-file Streamlined Forms?
Technically yes, but due to strict certification and audit risk, work with a qualified CPA experienced in IRS offshore filings.