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Which figures to use?

Which figures to use?

Old Jan 9th 2020, 10:29 am
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Default Which figures to use?

Preparing US Taxes and want to get this right, just unsure at present. Trying to work out which set of figures to file. The amount of money I transferred from my UK Bank in 2019 at the actual converted dollar rate(transferwise) when received into my US Bank or the actual amount of income received(pensions) into my UK Bank for 2019. Tend to think its the latter, but could be wrong, so just checking with the more informed here. Many thx.
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Old Jan 9th 2020, 11:47 am
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Default Re: Which figures to use?

There is no tax on transferred money. It is income that is taxed.
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Old Jan 9th 2020, 11:57 am
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Default Re: Which figures to use?

There is no remittance basis for individuals subject to US income tax, you are taxed on your worldwide income wherever it is received.

You can calculate the dollar amount at the IRS average rate for the year, or the actual rate on the day received, it is your choice.
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Old Jan 9th 2020, 6:17 pm
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Default Re: Which figures to use?

I have 5 payments into my UK account on different days each month, and make 1 transfer per month to the US.

For my tax return I use the rate I get from Transferwise, which I calculate as the number of dollars I receive in the US, divided by number of pounds exchanged. Or the average IRS rate for the year, whichever is lower. Last year the two were quite close as I suspect the IRS wised up to currency brokers, and revised their rate upwards from the bank rates.

Last edited by lansbury; Jan 9th 2020 at 6:21 pm.
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Old Jan 9th 2020, 8:20 pm
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Default Re: Which figures to use?

Well now I'm confused. I agree with Pulaski and MidAtlantic, that the figures I will use are the actual income received in the UK and not what I transferred over here during the year. So Lansbury, unless I am reading this wrong(usually am) am confused by your answer as to using a calculation of dollars you receive in the US?
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Old Jan 9th 2020, 8:38 pm
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Default Re: Which figures to use?

Originally Posted by branmin View Post
Well now I'm confused. .... So Lansbury, unless I am reading this wrong(usually am) am confused by your answer as to using a calculation of dollars you receive in the US?
Lansbury is just imputing an exchange rate by using the actual number of dollars he received in the US by the actual number of pounds he sent from the UK,rather than either the IRS average rate or any published rate. This approach only works if the fees charged are very low, as the fees are not tax deductible, but Lansbury's approach, unless I am much mistaken, has achieved a sleight of hand and loses the fees in the exchange rate, and then he includes the net dollar receipt in his US taxes.

Last edited by Pulaski; Jan 9th 2020 at 8:41 pm.
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Old Jan 9th 2020, 9:04 pm
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Default Re: Which figures to use?

Originally Posted by Pulaski View Post
Lansbury is just imputing an exchange rate by using the actual number of dollars he received in the US by the actual number of pounds he sent from the UK,rather than either the IRS average rate or any published rate. This approach only works if the fees charged are very low, as the fees are not tax deductible, but Lansbury's approach, unless I am much mistaken, has achieved a sleight of hand and loses the fees in the exchange rate, and then he includes the net dollar receipt in his US taxes.
Yes that is what I am doing. My argument, if challenged, is the fee is part of the exchange rate. Income must be entered on a tax return in dollars. I am entering the dollar amount I receive. Also I would argue if I use a bank or broker who doesn't charge a fee, but has a larger split below mid rate I could use that rate, so including the fees in the rate is quid pro quo.

However since the last tax return I see on the IRS average rate page the instructions have changed again. I can not find the part about using an average rate if you received regular payments throughout the year. The new instructions make it clear that it is the spot rate when the payment is received, so in my case instead of one calculation with an average rate I now have to make 60 with individual rates.

You must express the amounts you report on your U.S. tax return in U.S. dollars. Therefore, you must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.

https://www.irs.gov/individuals/inte...exchange-rates

Last edited by lansbury; Jan 9th 2020 at 9:07 pm.
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Old Jan 9th 2020, 9:13 pm
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Default Re: Which figures to use?

Originally Posted by lansbury View Post
.... My argument, if challenged, is the fee is part of the exchange rate......
Well I'm persuaded, but I am not certain that the IRS would be. ..... The amounts are likely to be pretty trivial though.
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Old Jan 10th 2020, 12:41 pm
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Default Re: Which figures to use?

Originally Posted by lansbury View Post
However since the last tax return I see on the IRS average rate page the instructions have changed again. I can not find the part about using an average rate if you received regular payments throughout the year. The new instructions make it clear that it is the spot rate when the payment is received, so in my case instead of one calculation with an average rate I now have to make 60 with individual rates.
I wonder what the purpose of the Average Exchange Rate now is?
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Old Jan 10th 2020, 1:03 pm
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Default Re: Which figures to use?

Originally Posted by MidAtlantic View Post
I wonder what the purpose of the Average Exchange Rate now is?
FBAR?
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Old Jan 10th 2020, 2:16 pm
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Default Re: Which figures to use?

Originally Posted by celticgrid View Post
FBAR?
No. That requires the Treasury Reporting Rate of Exchange which came out yesterday for December 31, 2019: https://www.fiscal.treasury.gov/repo...e/current.html
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Old Jan 10th 2020, 6:38 pm
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Default Re: Which figures to use?

Originally Posted by MidAtlantic View Post
I wonder what the purpose of the Average Exchange Rate now is?
I was wondering that, or if they will publish it for 2019.
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Old Jan 10th 2020, 6:53 pm
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Default Re: Which figures to use?

Originally Posted by lansbury View Post
I was wondering that, or if they will publish it for 2019.
It is now published for 2019: https://www.irs.gov/individuals/inte...exchange-rates
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Old Jan 10th 2020, 9:21 pm
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Default Re: Which figures to use?

Originally Posted by Pulaski View Post
Well I'm persuaded, but I am not certain that the IRS would be. ..... The amounts are likely to be pretty trivial though.
My calculation using Transferwise and including the fees in the rate gives me an average for 2019 of $1.2775. The IRS average rate is $1.2755.

Originally Posted by MidAtlantic View Post
That is quick this year. Wasn't there when I looked yesterday. As they've published an average rate, it would be rude not to use it.
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Old Jan 11th 2020, 7:47 am
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Default Re: Which figures to use?

Originally Posted by lansbury View Post
My calculation using Transferwise and including the fees in the rate gives me an average for 2019 of $1.2775. The IRS average rate is $1.2755.
Or you could substitute for the bolded part: which gives the true:

My calculation using Transferwise which gives the true rate gives me an average for 2019 of $1.2775. The IRS average rate is $1.2755.


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