Here is some important information from the IRS about income from foreign sources:Many United States citizens and resident aliens receive money from foreign sources. These taxpayers must remember that they must report all such income on their tax return, unless it is exempt under federal law.
U.S. citizens and residents are taxed on their worldwide income. This applies whether a person lives inside or outside the United States. Foreign income must be reported on a U.S. tax return whether or not the person receives a Form W-2, Wage and Tax Statement, a Form 1099 (information return) or the foreign equivalent of those forms.
Foreign source income includes but is not limited to earned and unearned income, such as:
- Wages and tips
- Interest
- Dividends
- Capital Gains
- Pensions
- Rents
- Royalties
An important point to remember is that individuals living outside the U.S. may be able to exclude up to $85,700 of their 2007 foreign earned income if they meet certain requirements. However, the foreign earned income exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S.
Be sure to contact your tax consultant or CPA about this potentially confusing issue. Additional information can be found at the IRS website.
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (PDF 348K)
This entry was posted
on Monday, February 25th, 2008 at 21:34 and is filed under Individuals.
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