Cross-border taxation between the United States and countries like India involves overlapping residency rules, foreign asset disclosures, and treaty elections. For work visa holders (H-1B, L-1), students (F-1/OPT), and U.S. citizens living abroad, filing the wrong form can trigger IRS notices or unnecessary double taxation.
1. Passing the Substantial Presence Test (SPT)
The IRS determines whether you are a Resident Alien (filing Form 1040 on worldwide income) or a Non-Resident Alien (filing Form 1040-NR on U.S.-source income only) using a 3-year weighted day-count formula:
- All days present in the U.S. during the current tax year (must be at least 31 days), plus
- 1/3 of the days present in the first preceding year, plus
- 1/6 of the days present in the second preceding year.
If the total equals or exceeds 183 days (and you are not an exempt individual such as an F-1 student within your first 5 calendar years), you are taxed as a U.S. resident.
2. FBAR (FinCEN Form 114) & FATCA (Form 8938)
Once you become a U.S. tax resident, you must report foreign financial accounts (including NRE, NRO, resident savings, fixed deposits, and foreign mutual funds) if your aggregate balances exceed:
- FBAR (FinCEN 114): Aggregate foreign account value exceeds $10,000 at any point during the calendar year.
- FATCA (Form 8938): Thresholds start at $50,000 on the last day of the tax year (or $75,000 at any time) for single filers living in the U.S., and $100,000/$150,000 for married couples filing jointly.
3. Preventing Double Taxation with Form 1116 & Tax Treaties
If you paid income tax in India (TDS) or another country on interest, dividends, or employment income, we help you claim the Foreign Tax Credit (Form 1116) or invoke the US-India Double Taxation Avoidance Agreement (DTAA) to reduce your U.S. tax liability dollar-for-dollar.