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Taxes (again)

Taxes (again)

Old Jan 9th 2015, 3:19 pm
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Default Taxes (again)

Confirmation would be appreciated on my following interpretation.

Yearly Average Currency Exchange Rates

As my OAP is paid directly into my US bank account the above information (when up-dated for this year) does not apply as it arrives in $'s as per bilateral agreements between the USA/UK. Whereas my Company pension which is paid into my UK bank would apply. Comment as always would be appreciated.
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Old Jan 9th 2015, 5:09 pm
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Default Re: Taxes (again)

That is exactly how I would do it, apply the average rate to the UK pension paid in GBP.
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Old Jan 9th 2015, 5:38 pm
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Default Re: Taxes (again)

If you receive it in USD there is nothing exchanged and therefore no exchange rate to apply. If you receive it in GBP then you must convert it to a USD figure, using either (a) the mid rate on each day that you receive it into your account in the UK, OR using the IRS average rate (either is acceptable, and calculating both and picking the lower is what a tax accountant would do).

Last edited by Pulaski; Jan 9th 2015 at 5:47 pm.
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Old Jan 9th 2015, 5:45 pm
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Default Re: Taxes (again)

Originally Posted by tony126 View Post
Confirmation would be appreciated on my following interpretation.

Yearly Average Currency Exchange Rates

As my OAP is paid directly into my US bank account the above information (when up-dated for this year) does not apply as it arrives in $'s as per bilateral agreements between the USA/UK. Whereas my Company pension which is paid into my UK bank would apply. Comment as always would be appreciated.
Yes, I believe you are right. Simply use the actual dollar amount received for your British state pension. For your company pension, it would be appropriate to use the yearly average currency rate. However - for FBAR and similar purposes, use the US Treasury published end of year rate.
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Old Jan 9th 2015, 7:24 pm
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Default Re: Taxes (again)

Thank you all for your time and answers. I think we are all on the same page from what I am reading.
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Old Jan 9th 2015, 7:52 pm
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Default Re: Taxes (again)

Originally Posted by Pulaski View Post
using either (a) the mid rate on each day that you receive it into your account in the UK, OR using the IRS average rate (either is acceptable, and calculating both and picking the lower is what a tax accountant would do).
You should not use the mid rate as that isn't what the IRS uses. You should use the actual rate you would have got if you had done the exchange that day.

The IRS average rate is calculated using the bank rate a customer would have received.
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Old Jan 9th 2015, 8:30 pm
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Default Re: Taxes (again)

Originally Posted by lansbury View Post
You should not use the mid rate as that isn't what the IRS uses. You should use the actual rate you would have got if you had done the exchange that day.

The IRS average rate is calculated using the bank rate a customer would have received.
That makes sense, and explains why the IRS rates are so far from the mid rates the media report.
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