DETROIT - April 5, 2016 - PRLog -- United States citizens and residents who worked abroad or received income from a foreign source, including income from foreign trusts and foreign bank and securities accounts, are required by law to report that income to the IRS.
This is true whether you reside in the United States or abroad and whether or not you receive a Form W2, Wage and Tax Statement, or Form 1099 from the foreign payer. The law applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties).
"Reporting foreign income can be complex and confusing, especially if you live outside the U.S.," said Venar Ayar, the principal and founding tax attorney for Ayar Law Group in Southfield, Michigan. "All U.S. citizens must file, regardless of how long they have lived and worked abroad or how much they are already paying in taxes to the countries where they live. To further complicate reporting, the IRS may require citizens to report foreign income and assets, whether living in the U.S. or abroad, by filing FATCA Form 8938 in addition to the FBAR.
For citizens and residents with foreign income to report, follow these tips to help with filing U.S. tax returns:
1. Report All Worldwide Income on Your Return. This includes wages, earnings, and income from foreign trusts and foreign bank and securities accounts.
2. File the Proper 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 also need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts.
3. 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 up to $100,800 of your wages and other foreign earned income in 2015. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, on the IRS website for more details.
4. Don't Overlook Credits and Deductions. You may be able to take a tax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.
5. Claiming Additional Child Tax Credit. You cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion.
6. File an Extension if Necessary. If you live outside the U.S. and can't file your tax return by the April 18 due date, you may qualify for an automatic two-month extension until June 15. This extension also applies to those serving in the U.S. military abroad.
About Ayar Law Group
Ayar Law Group, an award-winning, boutique tax law firm, represents individuals and businesses with tax problems that require creative resolutions. Because our focus is exclusively on tax problem resolution, we have the experience and knowledge to minimize clients' financial exposure and protect their assets whether those assets are in the United States or abroad. Our offices are located in Southfield, Detroit, Troy, Novi, and Farmington Hills, Michigan. For more information, visit http://www.ayarlawgroup.com.
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