AJP1

All,

I became a PR in November last year.

I'm just looking at what I need to submit as a tax return for myself and my wife. What supporting documentation is required for Foreign Earned Income and does anyone have any experience of that with e-filing? Does the IRS just take what you put on the form or would I need to send in supporting documentation (i.e. UK P45s and Dividends statements)? And how do they link what I send with the e-file, if I need to send anything.

I spoke to an accountant hoping to get an answer to this and he just said that I needn't declare any income at all (since none of it was US-sourced) and could still file jointly with my wife (which seems to contradict the IRS website).

Many thanks,
A

chicagojlo

My accountant had to make me a new appointment with a specialist as I had non-US earned income as well as a property sale overseas...not got around to finding out what I'll need though.

rew1000

Two thoughts:

1. I don't have a cast-iron answer, but in general, you just need to be able to put the correct figures on the form. Obviously, if they come back to you asking you to back up your assertions with evidence, paper records are good, but I don't believe they have to take a specific form. I've e-filed for a couple of years and included UK interest income for which they have nothing but my word for it, and haven't had any complaint.

2. Sound like you might be a "dual-status" alien for 2007 - nonresident for the first part of the year then resident once you became a PR. If so, you might want to check whether filing this way would save you money. Gory details in http://www.irs.gov/pub/irs-pdf/p519.pdf

P.S. I believe the accountant you spoke to is just plain wrong. I think filing as "dual status" achieves much the same thing though. It would mean completing a paper return!

paddingtongreen

If the USC uses the standard deduction, the non-USC cannot file jointly.

The standard deduction is a default allowance for expenses that would be deductible from income if itemized, but if the non-USC has been here less than the year, they cannot have used a whole year's deductible expenses, they must itemize. I believe that you do not report foreign income from before you arrived at the POE. I can't be sure that regulations haven't changed though.

Dan725

Did mine all myself using Turbotax Home and Business edition. Most of my income last year was foreign earned. All that is required is that you self declare it; you don't need to send anything now. In the unlikely event you get audited, just make sure you have your invoices (or paystubs) to hand. If you have been taxed on your foreign income, you probably won't need to pay any tax on it anyway, although by the letter of the law, you should declare it.

Dan725

I didn't when I first arrived here; as you state, before that point you are not a PR, therefore, no requirement to. So to the OP, if you did all your overseas earning before you became a PR, don't report it.

rew1000

I agree that the OP won't have to report the foreign income (if he wasn't living in the US before he became a PR). But I don't think he can just fill out a 1040 and leave out the foreign income. That's what a dual status return is for - you fill out a 1040 for the period since becoming a PR (with itemized deductions), and a 1040NR for the period of nonresidence. Nonresidents are only taxed on income that is "effectively connected" with the US, so the 1040NR might not have much on it. You then staple the two forms together, along with a letter explaining why you're filing a dual status return along with the relevant dates.

MsElui

I am having the same form nightmare too. We came across on L1a/L2 in October - and my husband was paid in the US from November onwards.

The accountants the company have provided have asked for all kinds of details about our income for 2007 - including lots of stuff before we came (ie my earnings, etc). I have no idea how to calculate it as p60's etc cover a different tax year to the us tax year. They also want to know mortgage interest payments etc - so will have to come up with a guestimate for that too.

rew1000

I've got no idea why they're asking you for non-US earnings before you entered the US. We were in the same situation a couple of years ago (H1B/H4) and non-US earnings before you arrived (i.e. nonresident alien) won't be taxable in the US.

Once you are here, it is generally better to be taxed as resident. In your case that will mean filing for an extension, waiting until half way through 2008, then making the "first year choice" to be treated as resident from when you arrived in 2007.

Peacefulove

This is all really confusing to me!

My husband is an accountant and is telling me I need to declare my UK income from January - April 2007 before I came here. I dont have pay stubs, P60s or whatever else I need and Im wondering what on earth it is I need to do.

Is it just a case of getting p60s and submitting those with the tax return? What actual documentation do they need???

SamuearlJackson

You do not need to send in documentation but it would be best if you actually had the pay stubs for your records so you could show them to the IRS if they decided to audit you. If you've spent most of the year here you can make the first year choice to be treated as a resident for the entire tax year. You should then be able to file form 2555 or 2555ez:
http://www.irs.gov/pub/irs-pdf/f2555ez.pdf
and exclude the UK earned income from US tax.

As already mentioned, publication 519 should be read.

Hope this helps

Rete

Not true at all.

We filed jointly the first year my husband was here as a non-usc and non-pr. We filed without itemizing and had absolutely no problems whatsoever.

paddingtongreen

I came single and I didn't have a problem either. Until I went for tax clearance to take a trip outside the USA. I went for the clearance on the day I was leaving, and I had to itemize on the spot, and then go and get a cashies check for about $400, that was money in 1967. For non-USCs, they checked the current paycheck and two years returns. Maybe they don't require that IRS clearance now.

Just a minute:http://www.irs.gov/taxtopics/tc551.html

"Certain individuals are not entitled to the standard deduction. They are:

1. A married individual filing a separate return whose spouse itemizes deductions,
2. An individual who was a nonresident alien or dual status alien during any part of the year, or
3. An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting cycle."


Vindicated

rew1000

I'm curious about tax clearance these days - certainly we've taken several trips back to the UK and no-one has ever asked us. You don't even encounter any customs/immigration staff departing...

Peacefulove

Thanks for the responses!

Well I dont have pay stubs, I am also non permanent resident, im waiting for my greencard still. I have been working in the USA from 1st November until now and was working from throughout January until Mid April last year.

So i dont need to send any paperwork in? Im still clueless about this