Did you receive income from a foreign source in 2015? Are you a U.S. citizen or resident who worked abroad last year? If you answered ‘yes’ to either of those questions, here are eight tips to keep in mind about foreign income:
1. Report Worldwide Income. By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts and foreign bank and securities accounts.
2. File Required 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 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, 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. 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.
For guidance on reporting foreign income contact Teri Cayea, CPA at 315.701.6338 or [email protected].
Source: IRS.gov