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Are you a resident alien? Do you generate income outside of the U.S. from work, securities or through other investments? If so, Belfint Lyons & Shuman wants to remind you that you need to report any 2012 foreign income earned to the IRS on your federal tax return. Most U.S. and dual citizens are often surprised to learn they need to report their global income to the IRS and in some cases the Department of Treasury. In order to comply with the requirements for 2012, taxpayers need to submit their filings to the IRS by June 17, 2013 assuming an automatic extension. To assist taxpayers, we have developed a list of tips to aid in the preparation process.
Foreign Income Filing Tips
Below is a list of helpful tips for foreign income filers, including:
- Report Worldwide Income. The law requires U.S. citizens, resident and certain nonresident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank, securities and other income generating accounts.
- File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, 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 TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department. See Publication 4261, Do You Have a Foreign Financial Account?, for more information.
- 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 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.
- Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012. See Forms 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion, for more information.
- Don’t Overlook Credits and Deductions. Taxpayers 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.
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