Tips for Taxpayers with Foreign Income

If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship. If you're a taxpayer with foreign income, here's what you should know:

1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. 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 $97,600 of their wages and other foreign earned income they received in 2013. Please contact us if you have any questions about foreign earned income exclusion.

3. 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.

4. 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 with the Treasury Department such as Form 8938, Statement of Specified Foreign Financial Assets or Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. Please contact us if you're not sure which forms you need to file.

5. Report Foreign Accounts and Assets. Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds.

Please contact us if you need additional information about thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2013 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2014. If you need help with this, please don't hesitate to call us.

6. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2014, may qualify for an automatic two-month extension to file their 2013 federal income tax returns. The extension of time to file 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.

7. Get Tax Help. If you're a taxpayer or resident alien living abroad that needs help with tax filing issues, IRS notices, and tax bills, or have questions about foreign earned income and offshore financial assets in a bank or brokerage account, please don't hesitate to contact us.