US Tax Returns: 15 June Deadline For Taxpayers Living In India

08 Jun 2013

Immigration News

The Internal Revenue Service, last week, reminded US citizens and resident aliens who have lived or worked abroad during all or part of 2012, that they may have a US tax liability and a filing requirement in 2013. "The IRS has finally decided that educating taxpayers and tax advisors of tax obligations of foreign assets and income would be helpful and encourage compliance. The recent education announcements appear to address the IRS' alleged shortcomings in educating taxpayers with foreign accounts," says Parag Patel, a tax attorney at New Jersey based law firm Patel Law Offices.

This announcement would be relevant for US citizens and green card holders who were working outside the US for all or some part of 2012.

Tax liability

All US citizens and green card holders must file their tax returns in the US on their global income irrespective of where they live. "They must pay taxes on such foreign income unless a treaty or statutory exclusion or foreign tax credit applies to reduce their US tax liability to zero," explains Florida based tax attorney Rahul Ranadive.

Moreover, tax payers must file their tax return in the US along with certain offshore asset compliance forms. Part III of Schedule B of Form 1040 asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires US citizens, green card holders and other residents to report the country in which each account is located.

Certain taxpayers must also file Form 8938 - Statement of Specified Foreign Financial Assets if the aggregate value of their foreign financial assets on Dec 31, 2012 exceeds prescribed limits (for instance, $ 100,000 for married filing jointly). In addition, they must also file Form TD F 90-22.1, commonly known as FBAR or Foreign Bank and Financial Account Report if the aggregate value of offshore financial accounts exceeds $10,000 during the year.

Due date and extension

While the 2012 tax filing deadline for taxpayers living in the US was April 15, 2013, if you are a US citizen or green card holder and were residing overseas on that due date, you are allowed an automatic 2-month extension to file your return and pay any amount due without requesting an extension. So this year, the automatic 2-month extension will be till June 17, 2013. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining that on the regular due date of the return, that is April 15, 2013, they were living outside the United States that their main place of business or post of duty was outside the United States .

Additional extension

If you are unable to file your return by the automatic 2-month extension date, you can request an additional extension to October 15 by filing Form 4868. You must file this form before the automatic 2-month extension date, that is, before June 17, 2013.

Penalties and interest

"Remember that these extensions are only extensions to file and not extensions to pay. So if you have a tax due, you should have paid it by April 15, 2013 failing which you will be charged interest on the balance between April 15 and June 17," says Vinay Navani, a CPA and director of tax at New Jersey based firm Wilkin & Guttenplan, PC. If you have taxes due and have not yet paid them, it might be best not to wait until June 17 but to do it at the earliest.

Also remember that any tax due payments made after June 15 will be subject, not only to interest charges but also to failure to pay penalties.

How to file

Filing your US tax returns from India can be quite a challenge. Not all software are equipped to handle foreign tax issues such as earned income exclusions - form 2555, foreign tax credit - form 1116, form 8938, form 8833 and so on. Moreover you may not be able to efile unless you have a US address. In most such cases, you would need to fill up the forms, print and mail them to the IRS office.

So do get started on the process now to be in time for the deadline.



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