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IRS Provides Tax Tips For Taxpayers With Foreign Income

Friday, March 29, 2013

The Internal Revenue Service (IRS) has reminded United States citizens and residents, including those with dual citizenship, who have lived or worked abroad in 2012, that they generally must file a federal income tax return and pay tax in the same way as people living in the country.

The tips that the IRS has given to taxpayers with foreign income start with the confirmation that the tax code requires US citizens and resident aliens to report any worldwide income, including income from foreign trusts, and foreign bank and securities accounts.

They are also reminded to file the required additional tax forms with their returns – for example, the form for interest and dividends, a statement of specified foreign financial assets, and a report of foreign bank and financial accounts.

US citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the US. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.

In addition, many Americans who live and work abroad are said to qualify for the foreign earned income exclusion. This means that taxpayers who qualify will not pay taxes on up to USD95,100 of their wages and other foreign earned income they received in 2012. Taxpayers may also be able to take either a credit or a deduction for income taxes paid to a foreign country.

Taxpayers who live abroad can prepare and e-file their federal tax return for free by using IRS Free File. People who make USD57,000 or less can use Free File’s brand-name software, while people who earn more can use Free File Fillable Forms, an electronic version of IRS paper forms.