Articles

Tax Pointers Part 3: Reporting Income Earned Around the World

In Accounting & Finances, Business, Taxes on August 4, 2015 by Sufen Wang

EarthMost people dream of traveling the globe. For others, journeying abroad is just all in a hard day’s work. If you’re U.S. citizen or resident who is employed overseas this year, or you earn income from a foreign source, continue reading for important pointers about reporting your non-U.S. income on next year’s tax return.

Although you may live in Kansas, the interest earned on funds in your Swiss bank account doesn’t exist somewhere over the rainbow in a land free of taxes. U.S. citizens and residents are required to report their worldwide income, including income from foreign bank accounts and trusts. This is done by filing the proper tax forms, namely Schedule B, Interest and Ordinary Dividends, Form 8938, Statement of Specified Foreign Financial Assets, and/or FinCEN Form 114, Report of Foreign Bank and Financial Accounts.

TravelHowever, if you have a home away from home in another country for work purposes, you might qualify for the Foreign Earned Income Exclusion. Use Form 2555 or Form 2555-EZ to see if you’re eligible for this exclusion. If so, you won’t have to pay taxes on up to $100,800 of your wages and other foreign earned income in 2015. And while looking at exclusions, also check for credits and deductions. You’ll have to make a tough choice between the foreign tax credit and doing an itemized deduction, but you generally won’t want to miss out either way. The goal is to keep from getting hit with a double tax-whammy from the U.S. and the foreign country where you’re bringing home the bacon.

Whether you’re drinking coffee in the Big Apple or shivering in Antarctica (hopefully not), you can file your taxes for free with IRS Free File. The IRS has made a dedicated push to make electronic tax filing quick and painless, and it is, for the most part. You’ll have a nice buffet of brand-name tax software to choose from if you make $60,000 or less per year, and if your income is over that, you can use the Free File Fillable Forms – which are slightly more of painful to complete, but still free. And most importantly, some Free File software products and fillable forms also support foreign addresses for all the folks living elsewhere.

International-BusinessTaxpayers back on American soil have the luxury of easy access to direct help on their tax questions via the IRS’s toll-free customer service line, Taxpayer Assistance Centers, Volunteer Income Tax Assistance, and other outlets. However, the IRS didn’t forget those abroad, although the assistance options aren’t quite as broad. For example, there are IRS employees ready, willing, and able to help in the U.S. Embassies in London and Paris. Both locations offer rather limited hours for walk-in assistance and phone service, so if you miss out and have a pressing question, try calling the International Taxpayer Service Call Center for a toll at 267-941-1000. If all else fails and the idea of filing your tax return on time makes you want to set up camp in a remote corner of the world, you might qualify for an automatic two-month extension, provided that you live and work outside the United States.

SuitcaseIf you have a long flight back home or you’re just looking for some titillating reading, check out the IRS’s Tax Guide for U.S. Citizens and Resident Aliens Abroad – it’ll make reporting foreign income on your 2015 U.S. tax return easier so you can embark on new adventures.

 

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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