2011 TurboTax w/ Foreign Income to report

[lubnajavid 20]

Just to add my 2 cents worth.

Don't always assume that the election to be treated as a US resident for the whole of the year is the best thing to do. It will depend on several factors such as how much and what type of foreign income you have, when you arrived in the US during the tax year and the tax position of the US Citizen such as whether they itemize or not. The earned income exclusion only excludes foreign earned income. Other foreign income will always be taxed in full subject to any double tax treaty and credit for foreign tax paid.

As a double check work out the taxes both ways, one with the election and one without to see which is the best.

The first US return is a pain but it does get a little easier after that.

thanks for your input - well worth the two cents!

[Nich-Nick 3,353]

im guessing you are not forgetting the part where the overseas spouse needs a SSN or ITIN?

if they dont have a SSN they need an ITIN - file the W-7 with your supporting documents and the tax return BY MAIL - not allowed to e-file.

And of course you have to leave SSN blank in the 1040

Agree. File the way that works out best. You can't file a joint return unless you make the election and report worldwide income, but the USC can always file Married Filing Separately. Single is not an option if you married during the year.

[JudyKCski 12]

I wish I would have had your walk though last week. I called the IRS 2 times prior to taking my 1040 to the Buffalo IRS last week because I needed a "agent" to verify his passport and he needed a ITN(ITIN).

My dilemma is my husband does receive monthly money from the country of Norway (NAV) as he is disabled and can not work. There is never more than $3,000 in his Norwegian bank account per month. Both IRS ladies told me that as there is less than $10,000 in his bank account that I did not need to make claim of it. He transfers the money from his Norwegian account to our US account monthly to use here.

What worries me NOW is the fact there is NO place on my tax forms that shows how much a year he gets or the fact he can be self-supporting (my wages are like $3,000 less a year than the 125% poverty threshold and I needed to get a joint sponsor).

Anyone have any suggestions - I realize I can send in an Ammendment to my(our) tax forms but that will need to wait until after we get his ITN. Suggestions anyone?

[Nich-Nick 3,353]

My dilemma is my husband does receive monthly money from the country of Norway (NAV) as he is disabled and can not work. There is never more than $3,000 in his Norwegian bank account per month. Both IRS ladies told me that as there is less than $10,000 in his bank account that I did not need to make claim of it.

The IRS ladies were probably talking about the FBAR form which is a report of foreign bank accounts due yearly June 1 to the US Treasury Dept (not the IRS) if you have more than $10k total in foreign bank accounts. If you filed jointly for 2011, you have to show his income. A pension or disability payment wouldn't necessarily fit this walk through. It is for salary income.

What worries me NOW is the fact there is NO place on my tax forms that shows how much a year he gets or the fact he can be self-supporting (my wages are like $3,000 less a year than the 125% poverty threshold and I needed to get a joint sponsor).

Anyone have any suggestions - I realize I can send in an Ammendment to my(our) tax forms but that will need to wait until after we get his ITN. Suggestions anyone?

So your I-864 is really a separate issue, although it would be nice to have a correct 2011 tax return. 2010 is your latest until April 17 which is the deadline for filing 2011 tax returns. An interviewer might ask for a 2011 one down the road, but maybe by then you'd have it sorted out.

You need to read the instructions for the I-864 carefully. His income can be reported on the I-864 if it will continue from the same source even when he lives in the US. A foreign job normally ends when you leave the country so that doesn't count of course. But your case is one of the exceptions where he's going to get his money regardless of where he lives. Your task is to provide documentation proving that money. A (translated) letter from the Norwegian government stating the amount and terms of his payments. Or 6 bank statements showing the deposits at the same time each month, especially those paid after he entered the US. Maybe a written and signed statement by him detailing the disability payments, for life(?) in his currency and showing the conversion rate equals $x.xx per month in US dollars so they don't have to connect the dots from just looking at statements.

Anyway if you can provide the proof that he gets that money paid to him and how it gets to the US each month, you have adequate household income that should allow you to sponsor without a joint sponsor.

[JudyKCski 12]

The IRS ladies were probably talking about the FBAR form which is a report of foreign bank accounts due yearly June 1 to the US Treasury Dept (not the IRS) if you have more than $10k total in foreign bank accounts. If you filed jointly for 2011, you have to show his income. A pension or disability payment wouldn't necessarily fit this walk through. It is for salary income.

Thanks for your response. What you posted looks reasonable. As the IRS folks did not seem the least bit concerned about the disability he received I guess I will not worry either. I feel pretty sure if they want more information they will let me know.

[kzielu 1,147]

Ok - I tried to do this and - I had a significant income in Poland though most of the year, than got some income here since started working in US in December. Turbo Tax seems to be treating my entire income as foreign earned while part of it has not be foreign earned. So, as an example (made up numbers) - 53k (Poland) + 5k (US) = 58k. That what get's on 2555 as foreign earned income. 56k out of it for some reason gets excluded - no clue where the 2k gets lost but it is still excluding more than I earned in Poland, which I believe is not right... Anyone has a clue ?

Edit - it says :

"We automatically transfer the amount of wages entered from your Form W-2 that you marked as being from a foreign source as well as any other wages you indicated were from a foreign source."

W-2 of course was not from a foreign source and I don't why it is treated like one...

Edited March 26, 2012 by kzielu

[Nich-Nick 3,353]

Ok - I tried to do this and - I had a significant income in Poland though most of the year, than got some income here since started working in US in December. Turbo Tax seems to be treating my entire income as foreign earned while part of it has not be foreign earned. So, as an example (made up numbers) - 53k (Poland) + 5k (US) = 58k. That what get's on 2555 as foreign earned income. 56k out of it for some reason gets excluded - no clue where the 2k gets lost but it is still excluding more than I earned in Poland, which I believe is not right... Anyone has a clue ?

Edit - it says :

"We automatically transfer the amount of wages entered from your Form W-2 that you marked as being from a foreign source as well as any other wages you indicated were from a foreign source."

W-2 of course was not from a foreign source and I don't why it is treated like one...

(Paraphrasing from memory here so not the exact questions) After entering your W2 info, the next screen or so says something like "Do any of these apply to this W2?". There's about a dozen check boxes. The first one says "I earned money in a foreign country." Nope not on that US W2 so see if you checked anything but the last one "None of the above". Go back to the wages screen, find your US income, and click edit. That will get you to that screen to see if you clicked "earned in foreign country" there.

I'll try to guess something else if that's not it. I did a brief try with your numbers above and it did not combine US earned with foreign earned when I did it. Are you filing with a USC and also entering your spouses wages?

[rick313 5]

(Paraphrasing from memory here so not the exact questions) After entering your W2 info, the next screen or so says something like "Do any of these apply to this W2?". There's about a dozen check boxes. The first one says "I earned money in a foreign country." Nope not on that US W2 so see if you checked anything but the last one "None of the above". Go back to the wages screen, find your US income, and click edit. That will get you to that screen to see if you clicked "earned in foreign country" there.

I'll try to guess something else if that's not it. I did a brief try with your numbers above and it did not combine US earned with foreign earned when I did it. Are you filing with a USC and also entering your spouses wages?

Hi all. I filed married jointly using Turbo Tax deluxe online. To report my wife's foreign income, I first tried to add her income on a W-2 for her, though she had no official W-2 notification as it was purely foreign income. It allowed me to do it. I then added her income again under the foreign income exemption, which she qualified for. This resulted in doubling her foreign income! I went back, removed her foreign income from the W-2, but left it in in the foreign income exemption part. This resulted in an accurate reporting of her income (which was exempted).

[Paul H 4]

Just to add my 2 cents worth.

Don't always assume that the election to be treated as a US resident for the whole of the year is the best thing to do. It will depend on several factors such as how much and what type of foreign income you have, when you arrived in the US during the tax year and the tax position of the US Citizen such as whether they itemize or not. The earned income exclusion only excludes foreign earned income. Other foreign income will always be taxed in full subject to any double tax treaty and credit for foreign tax paid.

As a double check work out the taxes both ways, one with the election and one without to see which is the best.

The first US return is a pain but it does get a little easier after that.

Yes this is very good advice. I just worked out my taxes filing as MFJ with the election assuming this would give me the best refund, but I was shocked when I saw the results from turbotax!

My Canadian spouse made over 70k while living in Canada in 2011 and made no income in the states. Even though the 70k+ was 100% excluded, the stupid way the IRS wants you to calculate your tax is based on the total of the U.S. citizen taxable income plus the excluded foreign income then you subtract the tax of the foreign income from that. So in reality the exclusion is not really an exclusion in the way you would think. See the 1040 Foreign Earned Income Tax Worksheet.

If your foreign spouse made a lot of money it will put you in a much higher tax bracket and you will be paying a lot more tax than you thought.

[HikerMark 5]

Yes this is very good advice. I just worked out my taxes filing as MFJ with the election assuming this would give me the best refund, but I was shocked when I saw the results from turbotax!

My Canadian spouse made over 70k while living in Canada in 2011 and made no income in the states. Even though the 70k+ was 100% excluded, the stupid way the IRS wants you to calculate your tax is based on the total of the U.S. citizen taxable income plus the excluded foreign income then you subtract the tax of the foreign income from that. So in reality the exclusion is not really an exclusion in the way you would think. See the 1040 Foreign Earned Income Tax Worksheet.

If your foreign spouse made a lot of money it will put you in a much higher tax bracket and you will be paying a lot more tax than you thought.

Good point Paul. I had forgotten about that.

The foreign earned income is treated as the bottom slice of income not the top slice as you would expect.

[jaesunlee 0]

Hello, first of all, thanks for a great walk-through. I currently work and live in South Korea. I need to file my 2011 fed income tax (I'm a US citizen) in order for my wife to get her green card. My only income in 2011 came from my foreign income. I filled out all the information on the turbo tax section for foreign income and it said that I don't owe any taxes. I guess my question is, if this is the only income I've had in 2011, are there any other specific forms I need to fill out? I got an error when doing the last "error check" that said the following:

Incomplete Tax Return

All of the following lines of Form 1040 have a zero value:

Line 22- Total income

Line 37- Adjusted gross income

Line 44- Tax

Line 54- Total credits

Line 60- Total tax

Line 72- Totaly payments

We can't transmit your return because it contains incomplete information.

Is this normal, or not normal for a person in my situation? Any help or advice would be greatly appreciated!