Foreign income is the income earned anywhere in the world. The US Internal Revenue service uses it to determine taxable income for both US Citizens and non-US residents. All US Citizens and resident aliens have to report their worldwide income even if they work and live abroad. Who Is Subject To US Taxes On Foreign Income? The IRS subjects US Folks to taxes on foreign income. US Persons consist of US Citizens, Spouses of resident aliens and US Citizens can elect to be treated as resident aliens for tax purposes and Non-US residents (those individuals who pass the Green Card Test or Substantial Presence Test). Report Worldwide Income Do you know Americans living abroad and many non-U.S. citizens must file a U.S. income tax return and report any income earned anywhere in the world? Some tax benefits like the foreign earned income exclusion are available to those who file US Tax Returns For Non Residents only. Apart from this, any income received, or deductible expenses paid in foreign currency need to report on a U.S. tax return in U.S. dollars. Both IRS Form 8938 and FinCEN Form 114 require the use of a Dec 31 exchange rate for all transactions, no matter what is the actual exchange rate on the date of the transaction. Normally, the IRS accepts any posted exchange rate that is regularly used. Report Foreign Accounts and Assets Federal law requires U.S. citizens and Nonresidents to report any worldwide income like income from overseas trusts and foreign bank and securities accounts. File Required Tax Forms Keep in mind that affected taxpayers, in most cases, have to file Schedule B, Interest as well as Ordinary Dividends, with their tax returns. In addition to this, Part III of Schedule B asks about the existence of overseas accounts like bank and securities accounts and requires U.S. citizens to report the country in which each account is opened. May be some taxpayers have to file additional forms with the Treasury Department such as FinCEN Form 114 (formerly TD F 90-22.1), Form 8938, Statement of Specified Foreign Financial Assets or Report of Foreign Bank and Financial Accounts ("FBAR"). Report of Foreign Bank and Financial Accounts (FBAR) Keep in mind that taxpayers do not file the FBAR with business, individual, trust or estate tax returns. But, they file with foreign accounts whose aggregate value exceeded $10,000 at any time during 2018 must file a Treasury Department FinCEN (Financial Crimes Enforcement Network) Form 114 and Report of Foreign Bank and Financial Accounts ("FBAR"). The deadline for filing the Report of Foreign Bank and Financial Accounts is the same as for a federal income tax return and should be filed by electronic means with the FinCEN by April 15, 2019. Additionally, Financial Crimes Enforcement Network grants filers missing the April 15 deadline an automatic extension until Oct 15, 2019, to file the FBAR. Read More
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