Missed Your PFIC or FBAR Filings? How to Catch Up in 2026
If you’ve recently realized that your Indian mutual funds are PFICs (as we discussed in [Blog #1]) or that your NRO/NRE accounts should have been on an FBAR, you aren’t alone. In 2025, KKCA assisted a record number of families who were “non-willfully” out of compliance.
The good news? The IRS provides a pathway to come clean called the Streamlined Filing Compliance Procedures.
1. Do You Qualify? The “Non-Willful” Test
The most critical part of this program is certifying that your failure to report was non-willful.
- Definition: “Non-willful” conduct is due to negligence, inadvertence, or a good-faith misunderstanding of the complex US tax laws.
- The Check: If you didn’t know about PFIC rules (which most people don’t) and weren’t intentionally hiding money to evade taxes, you likely qualify.
2. Streamlined Domestic vs. Foreign Offshore
Depending on where you lived in 2025, the terms of the amnesty change:
| Program | Who It’s For | Penalty |
|---|---|---|
| Streamlined Domestic (SDOP) | Residents living inside the US (e.g., H1B, GC). | 5% Title 26 Penalty on the highest year-end aggregate balance. |
| Streamlined Foreign (SFOP) | US Citizens/GC holders living outside the US. | 0% Penalty. You catch up for free. |
3. What Does the “Clean-Up” Package Include?
To get back into the IRS’s good books, you must submit:
- 3 Years of Tax Returns: The last three years of amended or original 1040s (reporting all global income and PFICs).
- 6 Years of FBARs: FinCEN Form 114 for the last six years.
- Form 14653 or 14654: A signed certification explaining your non-willfulness.
- Payment: All back taxes and interest due from the 3-year return period.
4. Why This is Critical for Indian Mutual Funds (PFICs)
Standard tax preparation often ignores the “interest charge” on PFICs. In a Streamlined filing, we can often make late elections or use specific accounting methods to minimize the damage of years of missed §1291 taxation. This is where professional expertise saves thousands of dollars.
5. The Risk of Waiting
The IRS can end these programs at any time without notice. Furthermore, if the IRS contacts you before you initiate a Streamlined filing, you are no longer eligible for the program and may face the full weight of:
- FBAR Penalties: $10,000+ per account, per year.
- Form 3520/5471 Penalties: $10,000–$25,000 per form.
- Criminal Prosecution: In extreme cases of willful tax evasion.
The KKCA “Peace of Mind” Guarantee
We have successfully guided hundreds of clients through the Streamlined Procedures. Our process includes:
- A Forensic Portfolio Review: We identify exactly which Indian assets (Mutual Funds, LIC, ULIPs) were missed.
- The Narrative: We help you draft a clear, truthful “Non-Willful Statement” that meets IRS standards.
- Audit Defense: We stand by your filing if the IRS has follow-up questions.
Looking for personalized tax services about your specific tax situation, please contact us. We are here to help you with your specific tax matters.
Disclaimer
This blog is intended for informational purposes only and does not constitute legal or tax advice. Please consult a qualified U.S. CPA or tax attorney for guidance specific to your situation.