Foriengn income of a LPR

[Brandon_tn 0]

My wife is the owner of a small company in her country. The company is paying its bills but producing little to no income at this time. My taxes are taken out of my salary at work and I always received refunds. I read that all foreign income is suppose to be reported.

Q. Are there exceptions, for example, if the income is not brought into the US?

Q. Any tips on filing taxes in this situation?

Q. I usually use Turbo-Tax. Is this too complicated for Turbo-Tax to handle?

Thanks for any info.

[TracyTN 237]

Moved to more appropriate forum.

[v333k 59]

Q. Are there exceptions, for example, if the income is not brought into the US?

No. The IRS doesn't care if you bring it or don't bring it to the US. A penny earned globally is a penny reported to the IRS as long as you are a USC or LPR. However, there are exceptions and limits.

Take a look at this link that contains information about foreign income but there is also an exclusion form and you might be able to use it. Read carefully and read it more than once... getting it done quickly is not good if it is not correct.

http://www.irs.gov/newsroom/article/0,,id=108276,00.html

Q. Any tips on filing taxes in this situation?

Sorry - not familiar with this type.

Q. I usually use Turbo-Tax. Is this too complicated for Turbo-Tax to handle?

I am sure Turbo-Tax handles this... this is a very common thing for many people who earn abroad. You might have to purchase a copy since I know the free copy handles basic information.

Thanks for any info.

[TracyTN 237]

Or perhaps use a tax professional this year so that you're sure its done correctly.

[New Beginnings 32]

Or perhaps use a tax professional this year so that you're sure its done correctly.

I agree, especially since it will be your first time. I would find someone who specializes in this. I once went to someone at H&R Block and they weren't familiar with my situation so I had to reschedule my appointment for weeks later so that someone who knew what they were doing could help.

[v333k 59]

Or perhaps use a tax professional this year so that you're sure its done correctly.

A much better suggestion!!!

[heatherTR 0]

We're just shelling out the big bucks to hire a CPA this year for a similar situation. The IRS publications are too confusing to figure out and be sure you won't get audited for doing it wrong.

[kaffy 2]

1. No exceptions. Must be reported

2. File your 1090 with Form 2555 or 2555EZ for foreign income tax exclusion

3. Turbo Tax handled ours last year just fine (combination of my husband's foreign income with my US based income)

[Nich-Nick 3,354]

I used Turbo Tax Basic. I would suggest you purchase the software and install it rather than TurboTax online. I tried the online during long forum tax discussions just to see if it would work like the installed version. It was a bit confusing on the immigrant/foreign income part.

If you installed TurboTax 2008 and can look at it, this is where the foreign income gets reported:

In the top menu bar VIEW > (drop down) INTERVIEW TOPIC > FEDERAL TAXES

Then you get a page that says:

FEDERAL TAXES

1. Wages & Income

2. Deductions & Credits

3. Other Tax Situations

CONTINUE

Click CONTINUE and on the next page choose SELECT SPECIFIC TOPICS

Then a long page comes up with all possible incomes. Way at the bottom of the list is LESS COMMON INCOME. In that list is FOREIGN EARNED INCOME. You can click "start" if you want to read how it guides you through the topic.

Edited January 8, 2010 by Nich-Nick

[Nich-Nick 3,354]

My wife is the owner of a small company in her country. The company is paying its bills but producing little to no income at this time. My taxes are taken out of my salary at work and I always received refunds. I read that all foreign income is suppose to be reported.

I also wanted to comment on -

I read that all foreign income is suppose to be reported.

Reported does not mean the same thing as pay taxes on. It is excluded unless she earns a great deal of money. Remember you convert hers to US$.

My taxes are taken out of my salary at work and I always received refunds.

You will have to file this year as "married filing separately" if you don't want to report her income or have her file taxes with you. That is traditionally the highest tax category and your refund will not be as much as it was as a single person or you could even owe.

To file "married filing jointly", she will need a SSN or ITIN number. But the advantage is you will have an extra person added so the personal exemptions is 2 and the standard deduction is doubled also. Your same income (because hers will be excluded) with more deductions should equal more refund for you. And if there are any government incentives like last year's Recovery Rebate Credit, having a spouse will often double your advantage on that.

You don't have a timeline so I don't know when she entered the US or if she has a green card yet. There's certain things you have to do to file jointly if she isn't a green card holder yet. Basically anybody who entered before approx. July 1, just files like any other American spouse (considered a resident) based on "presence" in the US. Those coming later in the year can "elect" to be treated as a "resident for tax purposes" by having each spouse write a statement saying you both wish for her to be treated as a resident for tax purposes (even though she is a non-resident as far as immigration is concerned.)

It's all lined out in Publication 519, which you should read. It's long, but skip over all the parts except those written for "resident aliens". It may take a couple of read-throughs, but it becomes clear eventually. It also tells exactly what the statements should include if you need to "elect" to be treated as a "resident for tax purposes." After the first year, it's all just normal filing after that with no statements, etc.