Tax Tips for People with Foreign Income

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Ajay Kumar, CPA, MBA

Foreign Earned Income Exclusion ($107,600 in 2020 vs $105,900 in 2019).

* 330 Days or Residency Test.

* Foreign Tax Credit (Form 1116) or Sch-A deduction.

  • Foreign Financial Assets (Form 8938) (MFJ: $1OOK
  • EoY/$150K  Anytime) Living in the US.
  • FBAR. ($1OK Anytime) Living in the US.

Five Tax Tips if you have Foreign Income

U.S. citizens and residents receiving foreign income (including interest and dividends) are required to include it while filing their US taxes.

1. Must File Taxes. The law requires U.S. citizens and residents living or working outside the United States to file and pay taxes in the same way as people living in the U.S including people with dual citizenship.

2. File Required Tax Forms. In most cases, taxpayers need to file Schedule 8, along with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of
Specified Foreign Financial Assets, while others may need to file Form FinCEN Form 114, Report of Foreign Bank and Financial Accounts, with the Treasury Department.

3. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2013 federal income tax returns.

4. Review the Foreign Earned Income Exclusion. Many people who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $97,600 of their wages and other foreign earned income they received in 2013.

5. Tax Credits and Deductions. You may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.

Finally, I would like to emphasize that each person’s situation is different so it’s important to fully consider your specific situation before deciding what type of forms to fill for foreign income. iFor additional information, please check IRS website at www.irs.gov

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