Tips for Reporting Foreign Income

How do you go about making extra money? If you’re all about making as much as possible, there’s a good chance you’re the type of person to chase every opportunity.

Astute business-minded people know foreign markets are an excellent way to earn additional income. If you’re new to the arena of foreign markets, you may not realize that you have to report the money you make overseas.

Reporting foreign income can be tricky, even after doing it for a while. There are several things you need to know before you start. Here’s how to report foreign income.

Foreign Versions of the W-2 Form

Most income generated in the United States requires a W-2 to file your taxes. The W-2 is the U.S. tax form, but other countries have forms that are comparable to it. The first thing you should do is find out if the country your foreign income derives from has a form.

Most countries that charge income tax will have one. Countries with some version of the form will make reporting foreign income much simpler.

Below are some countries’ versions of the W-2:

  • Great Britain – Form P60
  • Canada – T4 Slip
  • Australia – PAYG payment summary
  • Germany – Income tax certificate (Ausdruck der Lohnsteuerbescheinigung)
  • Japan – Japan tax certificate (Gensen-Choshu-Hyo)
  • Singapore – IR8A
  • Switzerland – Salary Certificate
  • The Philippines – BIR Form 2316
  • Mexico – Form 37, Anual Constancy of Wages and Salaries

Some countries, like the UK, have a different tax year than the United States. That means you won’t be able to import your information to do your taxes. The year-to-date information from your paystubs may be necessary to calculate your income for the U.S. tax year.

How to Report Foreign Income Without an Income Tax Form

If the country you work in or which you have investments doesn’t have a comparable W-2 form or year-end tax assessment document, you’re in for some work. To do your foreign income taxes, you’ll have to calculate your income and the taxes you owe by using your paystubs, bank records, investment reports, travel receipts, and other pertinent documents. After that, you’ll input your income on the IRS Form 1040.

Here’s the tricky part: you have to calculate your exclusions and credits. The U.S. has measures in place to prevent U.S. citizens from paying taxes twice for the same income. You’ll only be taxed by the U.S. and not the other country.

The Foreign Earned Income Exclusion allows people to withhold part of their income from U.S. taxes. The Foreign Tax Credit reimburses Americans for taxes paid to foreign countries.

First, you need to qualify for these measures. If you do, you’ll have to file Form 2555 for the FEIE and Form 1116 for the FTC. You’ll attach these forms to your 1040.

Then, you’ll have to report the FEIE on your Schedule 1, Line 8. You’ll report the FTC on your Schedule 3, Line 1.

Keep in mind that you may have to file additional forms.

You must report money in foreign accounts. You’ll also have more reporting to do if you own foreign mutual funds, if you own a foreign business, and are a shareholder in a foreign business.

If you have foreign bank accounts, you may also be subject to an FBAR audit.

Resources are Available to Help You During Tax Season

Foreign tax reporting can be complicated, but you don’t have to tackle your taxes alone. There are professionals available that can assist you with your taxes. They can make sure your taxes are done correctly so you can avoid complications.

If you found this guide on how to report foreign income helpful, we have other resources as well. We provide news about all kinds of topics. If you want to stay informed, subscribe to our site for the latest news.


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