Worldwide income can be financially disastrous if it’s not properly reported to the IRS. Even tax-exempt worldwide income needs to be reported. Are you are a US Citizen or a foreign national who met the substantial presence test in the United States and received income from a foreign employer in 2014 or have other sources of income abroad? If this is the case, the international tax team at LSL CPAs wants to ensure that you do not get in trouble with the IRS by making careless mistakes.
What is intriguing as well is the IRS wants to make sure you know the rules, file your taxes correctly and report your foreign income in the right manner. After all, coming after you for FBAR violations and IRS Form 2555 problems is a headache for the Revenue Agents. As a result, every year the Internal Revenue Service releases IRS tips about reporting foreign income. From the perspective of the international tax team at LSL CPAs, here are the most important tips for you to know:
4 IRS Tax Tips About Worldwide Income:
1) Report Worldwide Income
Without a doubt, this is the most important tip. It all begins with reporting. By law, U.S. citizens and residents – including foreign residents – must report their worldwide income. It does not matter if the income comes from foreign banks, foreign trusts, foreign relatives, foreign rental properties, foreign business interests, or foreign securities accounts. In almost all cases, worldwide income needs to be reported.
2) File Required Tax Forms
Worldwide income often means you need to file more forms like IRS Form 5471, IRS Form 8865, IRS Form 8858, and/or IRS Form 2555. In addition, you should consult with a foreign tax consultant to see if you need to file IRS Form 8938, Statement of Specified Foreign Financial Assets and/or FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Each violation of reporting requirements comes with a steep cost.
3) Review the Foreign Earned Income Exclusion
Can you claim the foreign earned income exclusion because you live or work abroad? Taxpayers that qualify will not pay tax on up to $99,200 of your wages and other foreign earned income in 2014. You need an international tax consultant to help you understand whether to file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
4) Did You Overlook Credits and Deductions?
Did you pay income tax to a foreign country? The tax team at LSL CPAs wants to make sure you know that you could be able to take a tax credit or a deduction for such payments. If both countries tax the same income, your IRS tax payments can be reduced by the amount of tax you have already paid to another country.
The goal of the international tax consultants at LSL CPAs is to make sure our clients with worldwide income remain in compliance with the IRS We also want to have their income tax payments and burden reduced if possible. First and foremost, we want to keep you safe and out of any trouble. Does that strategy make sense to you?
International Tax Accountant Help
It is important to further note that this article presents only a partial view of the subject matter. It does not claim or attempt to be comprehensive or perfectly accurate. To learn more about worldwide income and IRS reporting requirements, please call LSL CPAs international tax accountant Yana Weaver at 714.672.0022.
