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IRS Advises Taxpayers With Foreign Income

Tuesday, April 1, 2014

The Internal Revenue Service (IRS) has provided tips for United States citizens or residents living or working abroad, or those who received income from foreign sources in 2013.

Under US law, income from all sources within and outside of the US must be reported, and the rules for filing income tax returns are generally the same whether a taxpayer is living in the US or abroad. Such worldwide income includes income from foreign trusts, and foreign bank and securities accounts.

The IRS suggested that, if a taxpayer is living abroad and cannot file a return, which may include a Statement of Specified Foreign Financial Assets and a Report of Foreign Bank and Financial Accounts, by the April 15 deadline, they may qualify for an automatic two-month filing extension, until June 16, 2014. This extension also applies to those serving in the military outside the US.

A taxpayer living and working abroad may also be able to claim the foreign earned income exclusion of up to USD97,600 on wages and other foreign earned income in 2013, as well as a tax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce the amount of taxes that have to be paid if both countries tax the same income, the IRS explained.

In addition, every taxpayer can prepare and e-file federal tax returns for free by using IRS Free File. Those earning USD58,000 or less can use brand-name tax software, while those earning more can use Free File Fillable Forms, an electronic version of IRS paper forms. Some Free File software products and fillable forms also support foreign addresses for those who live abroad.

Tax help can also be obtained outside the US. The IRS has offices in Frankfurt, London, Paris, and Beijing, and IRS staff at these offices can help you with tax filing issues and answer tax questions.