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Your First Tax Year After Moving to the USA

Many Indian citizens and Indian-origin families find themselves asking, "What do I need to know about taxes now that I've moved to the USA?" This question is especially relevant for those who are navigating their first tax year in the United States. Understanding how your tax obligations change upon moving can help you avoid surprises and ensure compliance with both US and Indian tax laws.

Understanding Your Tax Status

Upon moving to the United States, your tax status may change significantly. A 'US person' includes US citizens, green card holders, and anyone who meets the substantial presence test. If you are living in the USA on a work visa such as H-1B, you may qualify as a US tax resident. This classification means you will be taxed on your worldwide income, which includes any income earned in India.

Income Considerations

It's important to recognize that income earned in India before you became a US resident is generally treated differently from income earned after your residency begins. For your first tax year, which may be a dual-status year, you will need to understand the distinction between these two periods. The income you earned while you were still a resident of India will not be subject to US taxation, but any income earned after establishing residency will be taxed by the US.

Reporting Foreign Accounts

If you have foreign financial accounts, you may have additional reporting requirements. The Financial Crimes Enforcement Network (FinCEN) requires you to file the FBAR (FinCEN Form 114) if the aggregate balance of all your foreign accounts exceeds $10,000 at any point during the calendar year. This requirement applies not only to accounts you own but also to accounts over which you have signature authority. Remember, the FBAR must be filed electronically through the FinCEN BSA E-Filing System, and it is separate from your federal tax return.

The FBAR deadline aligns with your tax return date in April, but there is an automatic extension to October, so you do not need to request an extension. Keep in mind that the FBAR filing is based on the combined peak balance of your accounts throughout the year, not just the year-end balance or the balance of individual accounts.

What to Do Next

As you prepare for your first tax year in the USA, here are some concrete steps to take:

Determine your tax status and whether you qualify as a US tax resident.
Identify all sources of income, both from the USA and India, and understand how they will be taxed.
Gather information about any foreign financial accounts you hold and assess whether you need to file the FBAR.
Consult with a tax professional who is familiar with both US and Indian tax laws to ensure compliance and optimize your tax situation.

By taking these steps, you can navigate your first tax year in the USA with confidence and clarity.

Before you act on this

This article is general information for the Indian community in the United States, not tax or legal advice. Thresholds, penalty amounts and filing dates are set by the IRS and FinCEN and are adjusted over time, so confirm the current year's figures before you rely on them. Your own position depends on your visa status, residency and the specific accounts you hold — speak to a qualified cross-border tax professional before filing or making a decision.