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Tax Filing - Exchange Rates

Tax Filing - Exchange Rates

Old Feb 6th 2019, 2:42 pm
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Default Re: Tax Filing - Exchange Rates

As I mentioned in another thread, or maybe this thread higher up, with increasing age my ability to wrap my head around simple arithmetic seems to be escaping me.

So the IRS Yearly Average Exchange Rate is $1 = £0.750. This makes £1 = $1.3333(etc) ??
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Old Feb 6th 2019, 2:51 pm
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Default Re: Tax Filing - Exchange Rates

Originally Posted by robin1234
As I mentioned in another thread, or maybe this thread higher up, with increasing age my ability to wrap my head around simple arithmetic seems to be escaping me.

So the IRS Yearly Average Exchange Rate is $1 = £0.750. This makes £1 = $1.3333(etc) ??
correct, to switch between the two rates just do the inverse. 1/0.75 =1.3333 and 1/1.3333 = 0.75
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Old Feb 7th 2019, 8:35 pm
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Default Re: Tax Filing - Exchange Rates

Originally Posted by durham_lad

correct, to switch between the two rates just do the inverse. 1/0.75 =1.3333 and 1/1.3333 = 0.75
Thanks! I think I was confused by it being a (suspiciously) round number this year!
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Old Feb 8th 2019, 6:59 am
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Default Re: Tax Filing - Exchange Rates

If the figures in this site are accurate and I'm reading them correctly, it seems the advantage spoken of in this thread has disappeared in 2018.
https://www.ofx.com/en-us/forex-news...average-rates/

Year IRS Figure from site
2015 1.4684 1.5285
2016 1.2987 1.3557
2017 1.2376 1.2886
2018 1.3333 1.3348
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Old Feb 8th 2019, 9:39 am
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Default Re: Tax Filing - Exchange Rates

Originally Posted by vespucci
If the figures in this site are accurate and I'm reading them correctly, it seems the advantage spoken of in this thread has disappeared in 2018.
https://www.ofx.com/en-us/forex-news...average-rates/

Year IRS Figure from site
2015 1.4684 1.5285
2016 1.2987 1.3557
2017 1.2376 1.2886
2018 1.3333 1.3348
I clicked on your link and the yearly average for the year ending Dec 31st 2018 is identical to the IRS figure of 0.75

i can’t figure out how to attach a screen shot from my iPad.

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Old Feb 8th 2019, 9:44 am
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Default Re: Tax Filing - Exchange Rates

from my laptop...

Date (GMT)Rate**
Average
December 31, 2017 0.776691
December 31, 2018 0.750148
**1 UNIT of USD = X UNITS of GBP

Last edited by durham_lad; Feb 8th 2019 at 9:46 am.
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Old Feb 8th 2019, 6:44 pm
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Default Re: Tax Filing - Exchange Rates

Originally Posted by vespucci
If the figures in this site are accurate and I'm reading them correctly, it seems the advantage spoken of in this thread has disappeared in 2018.
https://www.ofx.com/en-us/forex-news...average-rates/

Year IRS Figure from site
2015 1.4684 1.5285
2016 1.2987 1.3557
2017 1.2376 1.2886
2018 1.3333 1.3348
As I said above it seems that the IRS has realized that the average person can now get the spot rate, or close to it. The days of the IRS basing their average on High St bank rates seems over, or they rushed it this year because of the delay caused by the shutdown.
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Old Feb 11th 2019, 3:25 pm
  #23  
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Default Re: Tax Filing - Exchange Rates

Originally Posted by durham_lad


I clicked on your link and the yearly average for the year ending Dec 31st 2018 is identical to the IRS figure of 0.75

i can’t figure out how to attach a screen shot from my iPad.

I haven't been following rates by the day.....but has GBP to USD ever hit 1.33 for any length of time in 2018? I'm thinking it has been below 1.30 for most of the year. Where do they get these rates from?
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Old Feb 11th 2019, 3:30 pm
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Default Re: Tax Filing - Exchange Rates

Originally Posted by iceflow
I haven't been following rates by the day.....but has GBP to USD ever hit 1.33 for any length of time in 2018? I'm thinking it has been below 1.30 for most of the year. Where do they get these rates from?
It was up to $1.40 at one point.
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Old Feb 11th 2019, 4:54 pm
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Default Re: Tax Filing - Exchange Rates

OK. I notice that the US Treasury rate is more favorable at 1.28.

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Old Feb 11th 2019, 5:58 pm
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Default Re: Tax Filing - Exchange Rates

Originally Posted by iceflow
I haven't been following rates by the day.....but has GBP to USD ever hit 1.33 for any length of time in 2018? I'm thinking it has been below 1.30 for most of the year. Where do they get these rates from?
For FBAR you have to use the this Treasury figure which is the value published by them on Dec 31st

Originally Posted by iceflow
OK. I notice that the US Treasury rate is more favorable at 1.28.
This IRS published average can be used for regular payments such as pensions, dividends, interest etc. One off payments such as the sale of stocks should use the rate on the day of sale.
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Old Feb 11th 2019, 8:26 pm
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Default Re: Tax Filing - Exchange Rates

Originally Posted by iceflow
OK. I notice that the US Treasury rate is more favorable at 1.28.
The Treasury rate isn't an average rate. It is the rate on a given day.
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Old Mar 15th 2019, 5:58 pm
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Default Re: Tax Filing - Exchange Rates

I'll pop my question onto the end of this thread.

Brit-born, now US citizen and resident. I'm used to filing FBAR (20 years) and the newer form, 8938, with my IRS taxes since FATCA came in. The sterling exchange rate I have used for this has been the one found on the US treasury site at fiscal.treasury.gov. Frankly, as I have been reporting on monies in a bank account and a pension that is thus far unclaimed, all it is is an indication to the IRS and US Treasury of the approximate amounts in the accounts, on the grounds that this fluctuates on a minute-by-minute basis with share prices and currency fluctuations. At this point I am not paying any actual tax on this money.

However, this year, I reach 60, and it is now real money that is plopping into my account in the UK on a monthly basis. I see from earlier in the thread that Durham Lad keeps a spreadsheet of GBP deposits with the actual USD exchange rate on the day of the deposit taken from xe.com, this is what I was thinking of doing. Then later in the thread there is talk of using a broad-brush annual exchange rate to file taxes. Is this allowed? Isn't the 'proper' way to do it to take the exchange rate on the day? And also is xe.com an IRS approved source of the exchange rate? What about oanda.com?

Please, some advice from the wise ones on this site... and what is everyone else doing? Thank you.
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Old Mar 15th 2019, 6:11 pm
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Default Re: Tax Filing - Exchange Rates

If you receive regular payments, which your pension if paid monthly, weekly etc would be, you can use an average rate. The IRS publishes an unofficial average rate and I have used this since 2007 to change my UK income in dollars. I keep a record of what that average rate was and the date I obtained it from the IRS web site in case I'm ever audited. So far no problems at all.

ETA - I just looked up the IRS exchange rate page to copy the part about using average rates and it is no longer there. The page has been changed to using the rate on the day it now says:-

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.
The part about spot rate I take issue with because no-one gets spot rate. The only people I know who give spot rate is transferwise.com, but they deduct a fee so in practical terms you receive less dollars than spot rate would give.

Last edited by lansbury; Mar 15th 2019 at 6:21 pm.
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Old Mar 15th 2019, 6:32 pm
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Default Re: Tax Filing - Exchange Rates

Thanks for your reply lansbury

'spot rate' well yes, exactly, who's going to give me that rate if I wanted to bring it over to the US?

My pension is going into a UK bank account as the provider will not send it to a US account. In actuality, I am going to leave it in that account and use it as cash when I return to England for holidays. If it was being sent to a US account presumably a US$ amount would be deposited and I could use the 'actual' US$ amount that I get for my tax reporting.... my head is starting to hurt.

I'm just trying to do the right thing, not pay more in taxes than I need to and not fall foul of the IRS.
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