I'm Darrin Mish. For 32 years I've practiced federal tax litigation — routine audits, Tax Court cases, and everything in between. If you're facing an IRS issue, here's what you need to know first.
Many Americans work overseas and draw an income from these foreign countries. The US policy on offshore income is that you must declare it even if you are paying taxes for it in the country where you work. So if you are one of those who earn income from a foreign source, here are 7 tax tips for you. Click here to read or watch more IRS Help resources.
- Report all your Offshore income
By definition, offshore or foreign income is not limited to your monthly salary. It also includes foreign trusts, foreign bank and securities.
Depending on your particular circumstances, you may need to file different forms. For example, you may need to file Schedule B of your 1040 if you have over $1,500 in taxable interest or ordinary dividends, accrued interest from a bond, you received interest or ordinary dividends as a nominee etc.
Another form that may have to be filled is 8938 if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.
- Claim your Exclusion (if you qualify)
If you qualify for the foreign earned income exclusion, you will be exempted from tax for up to $99,200 of your wages and other offshore income in 2014. For more information, you can check out Form 2555 Foreign Earned Income or Form 2555-EZ Foreign Earned Income Exclusion at the IRS website, www.irs.gov.
- Claim your Credits and Deductions
If you pay income tax to the foreign country you work at, you will be eligible for a tax credit or deduction. Hence, you should claim what you are entitled to.
- Use Free File
The IRS Free File allows you to e-file your tax submissions. If you earned up to $60,000 you can use brand name tax filing software. If your income exceeds $60,000 you can use Free File Fillable forms which are digital versions of the IRS forms. Some Free File software products and fillable forms can also be used with foreign addresses for those who live overseas.
- Apply for Extension if needed
If you need more time to submit your taxes, you can apply for an automatic two month extension till June 16, 2015. All you need to do is submit a statement detailing why you require the extension with your return.
- Get IRS Tax help
You can go to the IRS website at www.irs.gov for free tools to help you submit your tax returns. Alternatively, you can call us at (813) 229-7100 for a free consultation.