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NRI US Tax return

Regulation in US

Any NRI whose income in USA is above threshold must file federal and State Tax returns in USA. This is to be done irrespective of the fact that NRI is filling tax returns in India. So NRI having income in India above threshold limit of taxable income have to file Income Tax Return in India and at the same time if NRI has income in USA above threshold limit of taxable income, USA tax returns also needs to be filed, since in US entire world income is taxed, so the same income is getting taxed at two places, however NRI can claim a credit of taxes paid in India in the USA tax return.

Anyone who is U.S. citizen or resident alien must report income from all sources within and outside of the U.S. This is true whether or not one receive a Form W-2 Wage and Tax Statement, a Form 1099 (Information Return) or the foreign equivalents.

Additionally, if you are a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad.

Hiding Income Offshore

Not reporting income from foreign sources may be a crime. The IRS and its international partners are pursuing those who hide income or assets offshore to evade taxes.

Foreign Financial Accounts

In addition to reporting worldwide income, NRI must also report on your U.S. tax return whether you have any foreign bank or investment accounts.

  • Where one has the financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
Consequences for Evading Taxes on Foreign Source Income

When IRS finds undisclosed income in foreign financial account, the demand will not only for additional taxes but for substantial penalties, interest, fines and even imprisonment.

The Foreign Account Tax Compliance Act (FATCA)

U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

FATCA will also require certain foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions will include not only banks, but also other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

Reporting by U.S. Taxpayers Holding Foreign Financial Assets

FATCA requires certain U.S. taxpayers who hold foreign financial assets with an aggregate value of more than the reporting threshold (at least $50,000) to report information about those assets on Form 8938, which must be attached to the taxpayer’s annual income tax return. The reporting threshold is higher for certain individuals, including married taxpayers filing a joint annual income tax return and certain taxpayers living in a foreign country