Hi,

I am resident of California and a citizen of Inida. I have been in United states since last 3 years on a temporary work permit (H1B).


I had opened an NRE and NRO (Non Resident Indian ) accounts with CITI Bank India in June 2008 which had cumulative principle amount of around USD 20000 together during year 2008

I came to know recently from few of my friends (and then subsequent search in Internet) , I need to report these accounts to IRS. Accordingly I have sent FBAR form with the details of these accounts and to the address mentioned in the IRS website

I have following question

1. The interest earned on the in the NRO account was Taxed at 30% in India. (I have all the tax deduction proof). Will it again be taxed in US.. Isn't there a Tax treaty between India and US.. I have not included the details of this in my 2008 Tasfiling but included in FBAR. Is that a problem..

2. Interest earned in NRE account is very nominal (6$) . I have not included this as well in my tax filing but included in FBAR. Is that a problem..

2. I saw that 20% principle amount will be deducted as penalty. If this is applicable to my account.. The money I have transferred to this account is my savings on which I have already paid tax in United States. (I have all the transfer proofs and US Tax filing proofs).

I am really confused and all my attempts to contact IRS on this has failed.

I appreciate if you reply to my questions .

Thanks you
Ganesh

1) Yes, it will be taxed by the U.S. because you are a resident alien, and the U.S. taxes ALL world-wide income of its residenta.

2) Probably not, due to the amount.

3) The FBAR penalty applies only if you did not submit the required paperwork.

Now, when you file your tax return, you need to submit Form 1116 to claim the Foreign Tax Credit (passive income) for the 30% Indian tax you have already paid. That avoids the double taxation.

Thanks a lot for your reply... Your answer actually gave me lot of comfort.. I have a related question though..

What kind of paper work required for avoiding penalty.. I believe this is the proof for the source of money in the account . I have proofs of wire transfer made from my US salary account to this account . Will that be sufficient..

I sent the forms to Detroit address and Now I am learning that I should have sent to Philadelphia address. Do you know a of a way I can track this..

Sorry I am little dumb when it come to taxes and finance and have got grossly mislead so far..

Thanks for your help again...

The address to submission of the FBAR requirement was contained in the form's instructions. If that is the address you sent it to, then you are fine.

If not, re-send it to the correct address. If you want to track it, send it Certified Mail with Return Receipt.

As for any penalty, the FBAR requirement has some prestigious penalties associated with non-compliance, but they have NOT been enforced, at least not in the past few years. That may change, but if you get the FBAR submitted in the next week or so, I would not worry about it.

Thanks a million for your answer... I have sent it to Detriot address as the Form had the instrctuion to send it that address.

Once again thanks you very much for giving me information as well as advice on this Forum.

You did not submit forms FBAR for 2007 and 2008 in time. There was amnesty scheme till October 15, 2009 and the form was required to be sent to a Philadelphia address given by IRS under the amnesty scheme.

You did not report bank interest on the tax returns. About NRO interest, you will hardly owe any U.S. tax as you will also file Form 1116 for foreign tax credit. The NRE interest is income for U.S. return and you do not get any credit. Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income (http://taxipay.blogspot.com/2008/03/us-citizen-or-resident-with-foreign.html)

In your case you will owe, but very small, U.S. tax. Any interest and penalty is based on tax you owe.
Make sure to do it right on your 2009 tax return. File FBAR by June 30, 2010.

What MukatA says is true about the amnesty address, but sending the form to the Detroit address should NOT have any adverse effect; the Detroit office will only forward the late FBAR forms to Philadelphia.