Tips for U.S. Taxpayers with Foreign Income

It’s not like ‘Out of sight, out of mind’. You can’t do that with the taxes you owe to your country of residence or origin. While you work abroad for a foreign company (or an American company with a foreign headquarters), you might be eligible for some tax advantages when you live and work abroad.

So, even if you live or work abroad or receive income from foreign sources during the year, being a U.S. citizen or resident, you must report income from all sources within and outside of the country. The rules for filing income tax returns are generally the same, whether you’re living in the U.S. or overseas.

Here are six tips from the IRS that U.S. taxpayers with foreign income should know:

1. Report Worldwide Income.

By law, U.S. citizens and resident aliens must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. File Required Tax Forms.

You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. See Azmoneyguy or your tax advisor for more information.

3. Consider the Automatic Extension.

If you’re living abroad and can’t file your return by the April 15 deadline, you probably qualify for an automatic extension until June 15. This is available to taxpayers who are living outside the US. You’ll then have additional time to file your U.S. income tax return.

4. Review the Foreign Earned Income Exclusion.

If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on wages earned outside the US and other foreign earned income. Each year the Foreign Income Exclusion amount changes. See your tax advisor for the current exclusion amount. For even more information, see instructions on Form 2555, Foreign Earned Income.

5. Don’t Overlook Credits and Deductions.

You may be able to take either a tax credit or a deduction (but not both) for income taxes you paid to a foreign country. These benefits can reduce the amount of taxes you must pay if both countries tax the same income.

6. Get Tax Help Outside the U.S.

The IRS has offices in Frankfurt, London, Paris and Beijing. IRS staff at these offices can help you with tax filing issues and answer your tax questions.

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