Consumers with overseas income should be prepared to claim it

overseasincomeThese days, many Americans may do a lot of business within the borders of the U.S., but also outside them as well. As a consequence, these people may have many different types of income, coming to them from various parts of the world, and they may need to keep in mind that all income is taxed in this regard, no matter what.

As a consequence, those who earn money from overseas sources while still operating in the U.S. - or not - may need to obtain tax documentation from their overseas employers or else face problems from the Internal Revenue Service, according to a report from the Grand Rapids Business Journal. For instance, even American citizens, or those who have U.S. green cards, may have to file tax returns even if they live in a foreign country, but there are some rules in place which will allow them to avoid essentially being taxed twice for the same income. That means those living in Canada, Mexico, Europe, or Asia - the most common places for such Americans to live while retaining their citizenship or green card status, and places where the U.S. has a large number of agreements with foreign governments related to taxation - will typically have to file once in each country, but often won't face any significant issues.

What does this mean?
For example, the country they are living in might tax them at one rate, while the U.S taxes them at another, the report said. Fortunately, individuals have the ability to claim the "foreign income exclusion," which would eliminate the need for them to pay taxes to the IRS on those funds, but that still means they will have to file tax returns in the exact same way as if they were still living in the U.S. Further, in many cases these people can also file their returns much later than those living on American soil, usually as late as mid-June.

However, because this kind of arrangement can often complicate tax matters for many Americans, regardless of where they live, it might be wise for them to consider working with a tax professional throughout the year as a means of avoiding significant issues that could arise later on.

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Posted To: Tax Ranger's Blog By: Tax Ranger On: Tuesday, June 17, 2014
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