What to do if you haven’t filed your taxes in the US?

What to do if you haven’t filed your taxes in the US?

by | Jan 11, 2020 | global income tax, Tax Exception, tax filing, Tax Liabilities, Tax Payers, Tax Planning, Tax Refund, tax return, tax savings, taxes

What to do if you haven’t filed your taxes in the US?

There can be an array of reasons for taxpayers not to file their taxes in the US. For starters, an individual might not have filed their taxes because they cannot pay their taxes. Or the more common reason is that individuals get consumed with life and work and cannot get things aligned to be able to file their taxes on time.

Irrespective of what your reason maybe, it is essential that you file your taxes at the earliest. Simply because non-filing of taxes is a serious issue for the IRS. There are three straightforward outcomes when it comes to filing your taxes. Firstly, you do not owe any taxes to the government. Secondly, the government owes you tax refunds and thirdly, you owe taxes to the government.

While the first and second scenarios are still easy to live by, the third one can take a hefty toll on you. In the event that you owe taxes to the government, you are liable to pay fines and penalties on the top of the taxes that you are liable to pay. And things can get ugly, quite fast.

File your Tax Returns

For individuals who have not yet filed their taxes, they must start immediately. The first question that will come to your mind is, for how many years should I file my taxes. As per the IRS guidelines, you must file your taxes for at least 6 years to establish a good understanding with the IRS.

If there are any changes to the same, the IRS management will have to approve of the same. Depending on the situation, the IRS management can ask you for tax returns exceeding 6 years as well. Here are some of the common reasons for the same.

  • If there are relatively larger tax bills on your past filings. The absence of any withholdings for large wages, property taxes or Form 1099-Misc is red flags for the same.
  • The IRS would most probably do additional scrutiny if any businesses are involved since the possibility of non-compliance is higher.

Tips For Filing your Taxes

Citizens who have not filed their taxes and wish to do so, here are some tips that will help you get through.

  • It is essential to get a confirmation whether the IRS needs 6 years of taxes or beyond. You can either call the IRS to find out the same or reach out to a tax consultant for the same.
  • One more reason to file your taxes at the earliest is that the IRS will not pay older tax refunds. As per the IRS guidelines, it will pay refunds up to a maximum of 3 years from the date of filing. Thus, you might lose any refunds even if they are valid.
  • There is a good possibility that you might have to pay hefty fines on your taxes. The failure to pay and failure to file penalties can accrue up to 47.5% of your liable taxes.
  • The IRS usually starts a process called the substitute for return, if the due date exceeds three years. When you file your taxes, the IRS will compare your returns with the SFR (substitute for return). And this can be time consuming, sometimes these cases might take up to four months.
  • In the event you cannot pay your liable taxes, it is recommended that you reach out to the IRS and ask for an agreement. Depending on your needs, there are several typesof agreements that you can opt for.

Irrespective of your reasons, if you haven’t filed your returns, you must initiate the same at the earliest to minimize its impacts.

Reference:

https://www.hrblock.com/tax-center/irs/audits-and-tax-notices/get-back-track-irs-havent-filed-one-returns/

https://twocents.lifehacker.com/what-to-do-if-you-havent-filed-your-taxes-in-years-1803756859

https://www.irs.gov/taxtopics/tc153

How to account for your Indian investments while filing for US taxes?

How to account for your Indian investments while filing for US taxes?

by | Nov 29, 2018 | Investment & Income, Tax Planning

How to account for your Indian investments while filing for US taxes?

The sole intent of investments is to increase your net capital over a period of time. indian investments With the advent of newer methods, individuals now have more avenues to invest their money and their money works harder. However, amidst all this one must not forget about the US taxes. While there are various reasons for the same, coming under the radar of the IRS is something that you wouldn’t want to happen.

If you are an NRI and have investments in the home country India, some or all of it might be taxable. Thus, it is crucial to be cognizant of them and includes them in your tax returns as and when it is required. Here are some of the leading investments that you can make and how they are impacted by taxes.

Fixed Deposit

NRI’s can either have NRO or NRE accounts with leading Indian banks. For that matter, individuals can choose to invest their money with the help of Fixed Deposits. The basic structure of a Fixed Deposit is quite similar to other capital investments. There is an initial amount and that increases year on year due to interests. Thus, during its maturity, it is similar to other capital assets, where your investment grows over time.

The interest that you have earned on FD’s must be first converted into USD for the specific fiscal year and then reported in Form 1099-NT. You might still have to pay taxes to the IRS on your FD. This example would make things a bit clearer. Let us assume you have earned an interest of INR 15,000 on your FDs and the Indian Government levies a tax of 15%. Should your tax bracket in the USA be 30%, you will have to pay the additional 15% to the IRS under the DTAA or Direct Tax Avoidance Agreement between the USA and India.

Mutual Funds and Stocks

Mutual funds and stocks are quite popular among investor for their incredibly high returns. Thus, there would be no surprises if an NRI invests in these assets. However, just as a fixed deposit, you will have to pay taxes on the dividends earned on these mutual funds or stocks. Stocks and dividends come under the purview of the capital gain taxation system. For any gains in short term or less than a year, you will be charged 15% by the Indian Government. Similarly, for long term gains, if the amount exceeds INR 1,00,000 you will have to pay 10% taxes on the same. Should your investments exceed $10,000 you need to declare the same using Form 8938 and FBAR.

Real Estate

There is no denying the fact that Real Estate has always been one of the most lucrative investment opportunities. Whether you are looking for a place to settle down in the future or buying it for outright investments, real estate is a lucrative market. But should you pay taxes for any real estate that you hold in India? Well, yes and no. As long as you hold property in India, you need not to worry about any taxations. However, if you sell a property while staying in the USA, capital gains tax is applicable on the same. And you are liable to pay the appropriate taxes in the US.

Also, there aren’t any specific rules or regulations for rent. Thus, you can declare them under other income in your Tax Returns. Being aware of the different taxes on your financial assets is important to keep the IRS from digging deeper and finding any discrepancy with your tax filing.

Don’t Forget These 6 Steps While Filing Your US Taxes in FY 2018

Don’t Forget These 6 Steps While Filing Your US Taxes in FY 2018

by | Nov 19, 2018 | Tax Planning, Tax Preparation

Don’t Forget These 6 Steps While Filing Your US Taxes in FY 2018

On paper,the filing of taxes just limited to one day. However, in most probability, it takes much more efforts. Sometimes, even an entire year’s planning, if you wish to be on the top of taxes. US Taxes Whether you are filing taxes for the very first time or are a seasoned campaigner at that, there are few things not to forget while filing your US taxes in FY 2018. Keeping these in mind will help you file taxes more efficiently and avoid IRS from scrutinizing your filing closely.

Need to file

The first thing that you need to figure out is whether or not you are required to file for taxes. There are a few factors that decide the tax liability of an individual such as the status of filing, age, or dependency. An example of the same would be, an individual who is less than 65 years and has an annual income of less than $12,000 might not actually have to file for taxes. Thus, take a few moments to assess your tax liability and the need for filing taxes.

Be Organized

Whether you a first-timer or have prior experience in filing taxes, it is crucial to be prepared and organized. Staying calm and organized will make the entire process much smoother. If you wish to add deductions to your filing, ensure that you keep receipts or proof for the same. Maintaining a separate file for taxes is the ideal way to go. When you keep all tax-related information at a single place, it becomes easier to deal with it.

Exemptions for Dependents

As already mentioned, it is important to know what your status is while filing for taxes. The status is even more crucial for first-time tax filers or students getting into jobs. If your parents have added you as dependent on their tax filing, you must let go of exemptions. A qualifying child cannot claim for tax exemptions and neither can their parents.

Deductions

There are several clauses in the tax laws which allow citizens to deduct certain expenditures. One must not overlook or ignore these expenses or deductions. Simply because they can reduce your tax liability by a handsome margin. For the year 2017, the average deduction for single tax filers stood at $6,350 and for couples who filed together, it was $12,700. Being aware of the different deductions available can help you save a considerable amount of money in taxes.

State taxes

The tax laws vary depending on the state of which you are a resident. The state tax returns also follow a similar schedule as the federal taxes. Thus, it is important to find out whether or not your income is taxable as per your state tax laws and which expenses qualify as deductions as well. Some of these could be related to your vehicle or home while others could be related to your job.

Verify your documents

Firstly, you need to keep a close eye on your mailbox since most employers and companies send out the W-2 or Form 1099 via emails. Once you do receive them, ensure that you scrutinize the details. If something is wrong with the W-2, ensure that it is corrected at the earliest rather than waiting for the deadlines. Thus, take some time off and verify all of the supporting documents for their authenticity and accuracy. Some time spent on this upfront will save you from a lot of pain down the road.

These are a few things that you should not forget while filing your taxes for the financial year 2018-2019.