Many U.S. citizens earn money from foreign sources. But unless it is exempt under federal law, taxpayers sometimes forget that they have to report all such income on their tax return.
U.S. citizens are taxed on their income regardless of whether they live inside or outside the United States. The foreign income rule also applies regardless of whether the person receives a Form W-2, Wage and Tax Statement, or Form 1099.
Foreign source income includes earned and unearned income, such as:
But there is some good news. Citizens living outside the United States may be able to exclude up to $92,900 of their 2011 foreign source income if they meet certain requirements. This will increase to $95,100 in 2012.
If you’re married and you and your spouse both work abroad and meet either the bona fide residence test or the physical presence test, each of you can choose the foreign earned income exclusion. Together, you can exclude as much as $185,800 for the 2011 tax year.
Caution: The exclusion does not apply to payments made to U.S. government employees or folks in the military living outside the United States.
If you earn income from outside the country, please be sure to meet with us about it. We can advise you on how to address all of the tax implications of this situation.
Silicon Valley
111 N Market St, Ste 300
San Jose, CA
Sacramento
Appointment Only
Join our Weekly Newsletter! We promise we won’t spam.
Copyright All rights Reserved. Financial Dream Team, like all providers of personal financial services is required by law to inform their clients of their policies regarding privacy of client information. The information in this material is not intended as tax or legal advice. Financial Dream Team, USA, LLC is a registered business in Califronia. Provided content is for informational purposes only.