Tax question for parents on GC

[kuchchbhee]

I am aware of the income requirement of ~$3700 for a parent to be included as a dependant and if the parent should file the income tax return. Both my parents have small pension in India and also other savings which might put them in border line or maybe just over the threshold of this number. My question is, how many folks out here actually disclose/consider the income in India for the purposes of filing tax returns. If my parents are filing tax-returns in India the i am assuming there is some clause to void the need of filing returns in US. Again, does IRS actually work with Tax/bank authorities in India to verify details? There is no motivation to cheat here... there is nothing to save, but the hassle of paper work will be humongous since both my parents are here.

 

[TheRealCanadian]

If my parents are filing tax-returns in India the i am assuming there is some clause to void the need of filing returns in US.

Wrong. Permanent Residents and US Citizens must file a US tax return.

Again, does IRS actually work with Tax/bank authorities in India to verify details? There is no motivation to cheat here... there is nothing to save, but the hassle of paper work will be humongous since both my parents are here.

A US tax return takes minutes to complete. I question your motivation.

 

[Jackolantern]

If my parents are filing tax-returns in India the i am assuming there is some clause to void the need of filing returns in US.

The taxes paid to India don't void the requirement to file a US tax return. However, the taxes paid to India may void some or all of the tax to be paid to the US for the Indian income. So they would file a US tax return, report the Indian income then subtract something based on the allowable tax treaties or foreign tax credits.

Again, does IRS actually work with Tax/bank authorities in India to verify details?

If they are audited, the IRS investigators sometimes will check with foreign governments and overseas banks to find out about their non-US income.

Note that another alternative is for you to NOT claim them as dependents. Then the threshold for them to be required to file a US tax return would increase to somewhere around $20000* (combined as a married couple), which may enable them to avoid having to file.

If you don't understand all the rules well, pay a tax professional (not H&R block!) who knows about these international tax matters. If you do it yourself and get it wrong that can trigger penalties and/or an audit. If you don't think you can get it done before the deadline, apply for the automatic 6-month extension to file. Then you'll have until October to gather all the papers and look for a tax professional. After the April deadline they are less busy and it's easier to negotiate a discount.


*however if they had certain transactions like selling stocks or a home, the threshold would be much less than that. See http://www.irs.gov/publications/p17/ch01.html#en_US_2011_publink1000170388

 

[Jackolantern]

A US tax return takes minutes to complete.

That is often false for people with multiple sources of income, particularly foreign income for which there are various calculations and treaties not handled by common tax software.

 

[kuchchbhee]

i will likely remove them as dependents

Note that another alternative is for you to NOT claim them as dependents.

thankyou. I had added them as dependent with assumption that it will indirectly eliminate the need for them to file seperate returns. I am not getting any benefits by adding them as dependent since i am being hit with AMT. i might seek extension and consult a professional when they are less busy. thaankyou

 

[Jackolantern]

thankyou. I had added them as dependent with assumption that it will indirectly eliminate the need for them to file seperate returns.

If you claim them as dependents, you acquire their exemption and they lose theirs, and their loss of that exemption lowers the threshold for them being required to file. So claiming them as dependents has the opposite effect of what you wanted -- it makes them more likely to have to file their own return.