December 27, 2024

Filing Form 8840: The Key to Avoiding IRS Penalties for Indians Returning from the US

Are you an Indian returning from the United States? Don’t let overlooked tax obligations cost you. Filing Form 8840 and a residency termination statement is critical to staying compliant with US tax laws and protecting your financial future. Here’s your ultimate guide:

1. Why is Filing Form 8840 and a Residency Termination Statement Essential?

When you end your US residency, Treasury Regulations under 26 CFR § 301.7701(b)-8 require submitting a statement indicating your residency termination date with your final tax return (Form 1040-NR). For NRI returning to india, this step ensures the IRS officially recognizes the end of your US tax residency.

2. The Risks of Skipping This Filing

Failing to file Form 8840 or the residency termination statement can lead to:

Being treated as a US resident for the entire calendar year.
Global income taxation, including income from Indian or non-US investments made after returning to India.
Double taxation, penalties, and financial uncertainty.

3. Understanding the Closer Connection Exception

Form 8840 helps you claim the closer connection exception, demonstrating your tax home is outside the US. This protects you from being classified as a US tax resident if you meet the eligibility requirements.

4. How Your Investments Can Be Impacted

Without proper filings:

Indian and non-US investments may fall under US tax jurisdiction.
You could face unexpected IRS liabilities on income earned from these investments.

5. Steps to Avoid Costly Consequences

File Form 1040-NR with a residency termination statement.
Submit Form 8840 to claim the closer connection exception.
Consult with cross-border tax experts to ensure compliance.

6. Future US Travel and Tax Compliance

Properly resolving your US tax obligations can safeguard your visa status and ensure smooth travel and re-entry to the United States.

7. Why Partner with Dinesh Aarjav & Associates?

At Dinesh Aarjav & Associates, we are trusted experts in NRI taxation and cross-border advisory, serving over 2,600 clients worldwide. With more than 25 years of experience, we provide:

Hassle-free filing of Form 8840 and residency termination statements.
Tax treaty optimization to minimize liabilities.
Tailored solutions to secure your investments in India and abroad.

8. Take Action Now

Delays in filing Form 8840 or the residency termination statement can have severe financial repercussions. Act today to ensure a seamless financial transition back to India.

Get Expert Assistance with Dinesh Aarjav & Associates

Simplify your tax journey with our dedicated team. Visit dineshaarjav.com to learn more and schedule a consultation. Trust us to help you navigate US and Indian tax complexities with ease.

By taking these essential steps, you can protect your finances, stay compliant, and build a secure financial future. Stay ahead with Dinesh Aarjav & Associates by your side.