Tax question - Figuring out foreign income

[AshMarty 360]

How are we supposed to know exactly what my husband made last year, if the Australian tax year and the American tax year are on different schedules? 

 

My husband has his "Individual tax return for 2017" from Australia but it is for THEIR entire tax year which is from July 1, 2016 to June 30, 2017. How are we supposed to know what he made from January 2017 - May 2017 for American tax purposes? Is there some kind system the US uses for this calculation?

 

 

Second question: Out of curiosity how does the US take into consideration the exchange rates for foreign income?  

 

Edited January 23, 2018 by AshMarty

[IcezMan_IcezLady 582]

You figure it out on your own using his paycheck. And you also figure out the exchange rate to use.

 

[Illiria 980]

It’s confusing but once you have done it once it’s easy to do in other years

 

We had this issue as my husband lived in the U.K. We had to estimate using his monthly pay slips

 

The exchange rate you have to use is on the irs website, search the forms for exchange rate and that will have the one they want you to use listed for each country.

[Illiria 980]

2 minutes ago, IcezMan_IcezLady said:

You figure it out on your own using his paycheck. And you also figure out the exchange rate to use.

 

You don’t get to use the exchange rate of your choice but must use the one listed for your earnings currency on their list which can be found in the list of forms on the irs website. 

[MariaR323 199]

24 minutes ago, AshMarty said:

How are we supposed to know exactly what my husband made last year, if the Australian tax year and the American tax year are on different schedules? 

 

My husband has his "Individual tax return for 2017" from Australia but it is for THEIR entire tax year which is from July 1, 2016 to June 30, 2017. How are we supposed to know what he made from January 2017 - May 2017 for American tax purposes? Is there some kind system the US uses for this calculation?

 

 

Second question: Out of curiosity how does the US take into consideration the exchange rates for foreign income?  

 

There's no "system" other than you simply doing the calculation and adding up the income for that specific time period you are reporting.

 

See the IRS page regarding foreign currency exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

[AshMarty 360]

 

2 minutes ago, Illiria said:

It’s confusing but once you have done it once it’s easy to do in other years

 

We had this issue as my husband lived in the U.K. We had to estimate using his monthly pay slips

 

The exchange rate you have to use is on the irs website, search the forms for exchange rate and that will have the one they want you to use listed for each country.

Yikes! This is confusing.. as if immigrating wasn't confusing enough.

 

I will have to see if he can track down his old pay stubs. 

Edited January 23, 2018 by AshMarty

[Illiria 980]

1 minute ago, MariaR323 said:

There's no "system" other than you simply doing the calculation and adding up the income for that specific time period you are reporting.

 

See the IRS page regarding foreign currency exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

Thanks for this they hadn’t updated the webpage last time I looked.

Just now, AshMarty said:

 

Yikes! This is confusing.. as if immigrating wasn't confusing enough.

Unless he gets income from overseas after he immigrated you will probably only have to do it once. 

 

Look at the instructions on where to file as overseas income had to send their forms to a different address when I last filed but that was a couple of years ago.

[Italian_in_NYC 259]

This is a bit of a grey area...

There are Proposed Regs (I think 1.898), but they were never finalized by the Treasury.

You are supposed to allocate the income till 12/31 (Australia is easier than UK - UK has an April 5 FY).

If not practical, you can pro-rate. I usually do this if the income is steady (say, salary) and never had a problem (knock on wood here) with the IRS.

If you have subpart F income it's much better to be accurate on the dates.

Exchange rates: if you prorate the income, you can use the average exchange rate for the year (Treasury, IRS, or other commercial websites like oanda or xe are all good).

If you know the exact date you received income (i.e.: dividend), then use the spot rate.