I worked in India for 8 years before I moved to the land of Motherhood and Apple Pie. These were my money-is-too-boring-to-think-about spendy years, and left to my own devices I would have saved nothing at all. Luckily, two things saved me from my innate spendthrift-i-ness.
- A friend determined to save me from myself introduced me to his childhood friend (we’ll call him J), who happens to run an investing firm. J insisted that I save something and I begrudgingly parted with small amounts of money at irregular intervals and J invested them for me – some in mutual funds and the some in the stock market. I gave J power of attorney and never spared the money another thought. J sends me monthly statements and for nearly fifteen years I opened not a single one (I: Hahahahahah. Me: I know. I know. That was hard to type. I: How could you be so ridiculously irresponsible? Me: Are you quite done beating that dead horse?).
- Employee Provident Fund (EPF) contributions. This is the Indian equivalent of a 401k. (I’m glossing over details and exceptions a little here, in the interest of brevity) 12% of your basic pay is automatically diverted into this fund and there is an employer match. The money is invested in a trust managed by the central government and this governing body declares an annual percentage of growth (typically 8-10%) for the trust. So I had 8 years worth of EPF contributions and growth that I withdrew before I set sail, and I dumped what I had accumulated into the capable hands of J.
I moved here with less than five thousand dollars in cash and embarked upon my new life with gusto. My Indian Stash was out of sight and most definitely out of mind. Every year I filed my taxes here using Turbotax. I would put off filing until the last possible moment and then subject myself to what felt like a never ending stream of questions by Turbotax. One of those ten thousand questions was a question about my foreign bank accounts. Did I, inquired TT politely, have more than $10,000 secreted away in one or more foreign bank accounts? For all years but one, I answered, with gritted teeth and frayed patience, no, no I do not and are you quite done with all the questions you nosiest and boringest of all software ever created?
I took the question quite literally. I had a couple of bank accounts in India. There was not much money in them. I never stopped for one second to consider that bank accounts might just actually mean all liquid assets. That it might just include the assets that J was managing for me. That maybe, just maybe, I ought to consider including money I had invested in funds or in the stock market.
(I: Hahahahahaha. Me: Oh you just shut up. Nobody needs to hear from you again).
Seven years rolled by. Then one day I got a call from J.
J: “Have you been paying attention to your money lately?”
Me: “Yes, of course. I read the statements. Good work J!” (my nose grows long enough to form a bridge over the San Francisco Bay)
J: (long, disbelieving, disapproving silence). Then, “Well, how much are you worth then?”
Me: (scrambling through email, cursing my slow as molasses LTE connection) “Ummm…”
J: “You now have more than $100000 invested with me” (he actually gave me the rupee amount, I’m paraphrasing).
Me: (shocked silence). “Are you sure that you’re talking about my account?”
I was convinced that J was joking. You see, the total amount of money that I had invested with J, over eight unwilling years, was (my record keeping at the time was really very shoddy) somewhere between $25k and $30k. He was not joking. The Indian market had been working hard on my behalf.
And then he told me that the reason he was calling was because the Foreign Account Tax Compliance Act (FATCA) was starting to be implemented in India and he wanted to make sure that if he was asked to release information about me to the US government, that I had already made all the appropriate declarations and paid all the appropriate taxes in the US.
Me: “What the fuck is FATCA and what do you mean by appropriate taxes?”
Oh boy. My pet ulcer, Huey, was born that day.
I spent a few weeks (I: weeks? It was not weeks. It was months. Me: Seriously, shut up. God, I hate you) doing my best ostrich impersonation. This could not be happening. I do not have a criminal bone in my body. The idea of having a traffic cop stop me for speeding makes me wants to throw up and cry. Huey grew to adolescence. Then I moved on to my world famous headless chicken impersonation. This is really very good. You would be privileged to witness it. And then, finally, finally, I started to ask around for a recommendation for a professional who could tell me exactly how deep a hole I had dug for myself and if there was a way for me to get out of it that did not involve turning in all my worldly possessions to the IRS and a few years of sharpening shivs in prison. Huey was busy having his mid life crisis.
I found a tax consultant to help clean up the mess and he told me about the Streamlined Domestic Offshore Procedures (SDOP) program that was introduced by the IRS in 2014. Under the rules of the SDOP, if you can persuade the IRS to view you as a bungling, drooling idiot (as opposed to a tax evading criminal mastermind), they won’t throw you in chains and you will owe the relatively modest amount of 5% of your undeclared assets in fines.
While giving the IRS 5% hurts, it is far better than the alternatives. If you can’t persuade the IRS that your intentions were good though your execution was shabby, you need to petition them under the aegis of the Offshore Voluntary Disclosure Program (OVDP) which will cost you a hefty 27.5% of your assets (and a ton more paperwork). And, of course, the absolute worst case is if they decide that you aren’t amnesty worthy. In that case you lose 100% of your undeclared assets and get invited to spend some quality time at a federal facility (BYO shiv, black tie optional).
Our tax consultant decided that not even the most dim witted taxman would ever confuse Mr. BITA or me with a criminal mastermind. Our ignorance is writ large all over us. So we’ve sent in our SDOP application to the IRS. It can take up to 6 months for them to evaluate and (hopefully) close our case. Here is what my stupidity cost us:
- $3750 Cost of tax consultant to advise and then file all the relevant documentation with the IRS. They threw in our 2015 US tax filing for ‘free’ (when I discovered that we had fucked the pooch we filed for an extension for 2015).
- $2336 Back taxes owed on the undeclared Indian money. This is 3 years worth of unpaid taxes.
- $6027 The 5% penalty under the SDOP program.
I mentioned in my September 2016 update that we weren’t able to invest because we were saving up for expenses in October. Well, this is what that was all about. The total cost was $12113.
At least I can now start enjoying the fact that the Indian Stash exists and that we have more than I knew. And Huey can start to shrivel up and die. RIP Huey. You will be remembered, but never missed.