Your Thoughts about pay in Euro or US Dollars

[christeen 966]

OK... So I am looking for some thoughts about a choice that was offered to my husband from his company... Currently, he is paid in US Dollars with all taxes and withholdings... A percentage of his work is performed out of the country and billed to the European headquarters and his pay comes from the EU HQ.

He was asked if he prefers to have the portion of his pay performed and paid by the EU office to be paid to our Italian account and paid in Euros... His jobs from the US branch will continue to be paid in US Dollars with taxes withheld.

In our thinking this works out very well for us as we have both bases covered (pay in Euro and Dollars) and get a foreign income credits/exemptions... It will cause a real nightmare for taxes next year... But I would like to hear some thoughts on this option.

The other option is that the jobs done for the EU Hqtrs is paid to the US branch then paid to him in US Dollars via his regular paycheck...

Thoughts??

[scandal 951]

In our thinking this works out very well for us as we have both bases covered (pay in Euro and Dollars) and get a foreign income credits/exemptions...

I don't see how that would work. If your husband remains resident in the US, he won't qualify for foreign income exclusions.

To file for the foreign earned income exclusion you must have your tax home in another country outside the US, and you must pass either the bona-fide resident test or the physical presence test. It doesn't seem your husband will pass either test. Simply earning salary in foreign currency paid to a foreign bank account will not qualify for the exclusion.

See IRS website for more details.