The situation: Priya moved to the US on an H-1B in 2017 and became a US tax resident under the substantial presence test almost immediately. She kept her NRE and NRO savings accounts in India — money from her pre-US salary, a small fixed deposit, and a mutual fund SIP she'd started before leaving. She filed US tax returns every year through her employer's payroll provider, but nobody ever asked about foreign accounts, and she didn't know FBAR applied to her at all. By the time she found out, seven years had passed.
Why she landed in SDOP, not SFOP: Priya lived and worked in the US continuously — she never met the 330-day-outside-the-US test in any relevant year. That puts her squarely on the domestic track.
What the filing involved:
- 3 years of amended returns adding previously unreported NRO interest and mutual fund capital gains
- 6 years of FBARs covering every account, including ones long since closed
- A 5% miscellaneous offshore penalty, calculated on the single highest year-end aggregate balance across all her foreign accounts during the 6-year period — not a cumulative or annual charge, just one number, once
- Foreign Tax Credit for TDS already deducted in India, reducing the incremental US tax owed
What surprised her most: the 5% penalty base was calculated off the highest balance in any single year — meaning a temporary spike from an FD maturity or a one-time transfer could disproportionately inflate the number if the timing isn't reviewed carefully before filing. This is exactly the kind of detail that's worth having checked rather than assumed.
The real lesson: the FBAR requirement isn't about how much money is involved, or whether India already taxed it — it's a reporting obligation that exists independently of tax owed. Priya owed very little incremental US tax, thanks to the Foreign Tax Credit, but the FBAR gap alone was enough to require going through the full process.