Thursday, June 18, 2020

Some Important Points to Keep in Mind About Foreign Income and Taxes

Diversifying your income is always a good idea to combat the ups and downs of the global economy. When you have foreign income, it is essential that you understand the impacts of taxation on that income. A misstep could end up costing you a lot in the long run.

Do You Have To Pay Taxes?

The IRS reminds you that if you are a U.S. citizen, it does not matter where you live or work, you must pay U.S. income tax. There are some credits or exclusions that you may be able to get, but it is imperative that you file your taxes each year with the IRS to avoid issues.
This rule also applies to any legal resident who holds a green card. Unless you give up your status, you must pay U.S. income tax.

What Is the Foreign Tax Credit?

If you have income in a foreign country, then that country will also likely want you to pay taxes on it. The IRS recognizes the taxes you pay to other countries through the foreign tax credit, which Forbes explains is a deduction you can take on your U.S. income taxes for other taxes you pay. Do note that this credit only applies to taxes you owe. It is not a refundable credit.

What Other Rules Should I Know?

When foreign filing New York NY, you should also be aware that you need to check completely for all possible exclusions, credits, and deductions you can take. There is a range of options, but it is easy to overlook them. Make sure that you carefully review all IRS publications for foreign income to get the maximum benefits.

Don't Get In Trouble With the IRS

Finding yourself in a sticky situation with your taxes is never a good thing. So, make sure that you understand your obligations when it comes to foreign income before tax time. Protecting yourself in this situation is about how much you know.

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