If you have income from work or investments overseas, it is important that you pay your taxes on this income. This would involve those with dual citizenships and those who have lived and worked in other countries either the whole or part of 2011. The IRS has issued 6 guidelines for you if you fall into this category of taxpayers.
1. Know if it applies to you
Under US tax law, all your overseas income earned through whatever means is taxable even if you are paying taxes in your host country. This includes foreign bank interest, stock dividends, foreign securities income, income from foreign trusts, foreign investment income etc. So even if you do not have a job overseas, you are still liable for tax if you draw income from any of these overseas sources.
2. Meet the deadline
The filing deadline for those with foreign income is June 15 if you are either a military personnel serving abroad or a US citizen or resident alien living overseas. The actual deadline to submit taxes is April 17 this year (2 days later than usual due to Emancipation Day holiday in Washington DC). If you are in either of the two categories above, then you qualify for an automatic extension of two months till June 15 but you have to submit a statement along with your tax return detailing which category you come under.
3. Know your exclusions, credits and deductions
If you have foreign income, you likely qualify for the Foreign Earned Income exclusion. This exclusion exempts you from paying tax on up to $92,900 of wages and other foreign earned income. In addition, you may also be able to claim a credit or deduction for taxes paid to your host country or a US possession. This benefit is designed to lower your taxes when you pay taxes to both the US and your host country.
4. Fill the correct forms
Those with foreign income would be required to fill Schedule B, Interest and Ordinary Dividends and include it with their tax return. Certain taxpayers may also have to fill out the new Form 8938, Statement of Foreign Financial Assets and attach it to their tax return. Some taxpayers may have to file Form TD F 90-22.1 with the Treasury Department by June 30.
5. Use free file
The free file service is provided by the IRS for those who qualify. The IRS free file offers the use of brand-name software to prepare your returns and free electronic filing. But to qualify, you have to have an adjusted gross income of $57,000 or less.
6. Get tax help
If you require assistance in filing your taxes, you can get help from any US Embassy where the IRS has a permanent staff. You can get the list from www.irs.gov under the “Contact Your Local Office” section, under International. At these offices, you can obtain tax forms and other relevant information. IRS publications, tax forms and more information can also be found on the International Taxpayer page.