Reporting Foreign Income: Eight Tax Tips from the IRS

Did you receive income from a foreign source in 2015? Are you a U.S. citizen or resident who worked abroad last year? If you answered ‘yes’ to either of those questions, here are eight tips to keep in mind about foreign income:

1. Report Worldwide Income. By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts and foreign bank and securities accounts.

2. File Required Tax Forms. You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Visit IRS.gov for more information.

3. Review the Foreign Earned Income Exclusion.  If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $100,800 of your wages and other foreign earned income in 2015. See Form 2555, Foreign Earned Income, or Form 2555EZ, Foreign Earned Income Exclusion, for more details.

4. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.

5. Additional Child Tax Credit. You cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion.

6. Use IRS Free File. Almost everyone can prepare and e-file their federal tax returns for free, using IRS Free File. If you make $62,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Some Free File software products and fillable forms also support foreign addresses. Free File is available only through IRS.gov.

7. Tax Filing Extension is Available.  If you live outside the U.S. and can’t file your tax return by the April 18 due date, you may qualify for an automatic two-month extension until June 15. This extension also applies to those serving in the U.S. military abroad. You will need to attach a statement to your tax return explaining why you qualify for the extension.

8. Get IRS Tax Help.  Check the international services  site for the types of help the IRS provides, including how to contact your local office internationally. All IRS tax tools and products are available at IRS.gov.

For more on this topic refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. You can get all IRS tax products on IRS.gov/forms.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Check out this Chart to Discover how the Health Care Law Affects You

Form 8965

The Affordable Care Act includes the Individual shared responsiblity provision and the premium tax credit. This chart explains how the health care law may affect you and your tax return.

 IF YOU… THEN YOU…
Are a U.S. citizen or a non-U.S. citizens living in the United   States Must have qualifying health care coverage, qualify for a health   coverage exemption, or make   a payment when you file your income tax return

Had coverage or an employer offered coverage to you in the   previous year

Will receive one or more of the following forms;

      
  • Form 1095-A, Health Insurance Marketplace Statement
  •   
  • Form 1095-B, Health Coverage
  •   
  • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

This information will   help you complete your tax return.

 

Had health coverage through an employer or under a government   program (such as Medicare, Medicaid and coverage for veterans) for the entire   year

 

Just have to check the full-year coverage box on your Form 1040   series return and do not have to read any further

Did not have coverage for any month of the year Should check the instructions to Form 8965, Health Coverage Exemptions, to see if you are eligible for an exemption

 

Were eligible for an exemption from coverage for a month

 

Must claim the exemption or   report an exemption already obtained from the Marketplace by completing Form   8965, Health Coverage   Exemptions, and submitting it with your tax return

Did not have coverage and were not eligible for an exemption   from coverage for any month of the year Are responsible for making an individual shared responsibility payment when you   file your return
Are responsible for making an individual shared responsibility   payment Will report it on your tax return and make the payment with your   income taxes
 Need qualifying health care coverage for the current year Visit Healthcare.gov to find out about the dates of open  and special enrollment periods for   purchasing  qualified health coverage. 
Enroll in health insurance through the Marketplace for yourself   or someone else on your tax return.

Might be eligible for the premium tax credit

Received the benefit of more advance payments of the premium tax   credit than the amount of credit for which you qualify. Will repay the amount in excess of the credit you are allowed   subject to a repayment cap.
Did not enroll in health insurance from the Marketplace for   yourself or anyone else on your tax return

 Cannot claim the premium tax credit

Are eligible for the premium tax credit Can choose when you enroll in coverage to get premium assistance   sent to your insurer to lower your monthly payments or get all the benefit of   the credit when you claim it on your tax return
Choose to get premium assistance when you enroll in Marketplace   coverage. Will have payments sent on your behalf to your insurance   provider. These payments are called advance payments of the premium tax credit
Get the benefit of advance payments of the premium tax credit   and experience a significant life change, such as a change in income or   marital status Report these changes in circumstances to the Marketplace when they happen
Get the benefit of advance payments of the premium tax credit Will report the payments on your tax return and reconcile the   amount of the payments with the amount of credit for which you are eligible

Phone Scams are a Serious Threat

Phone Scams Continue to be a Serious Threat, Remain on IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, headlining the annual "Dirty Dozen" list of tax scams for the 2016 filing season, the Internal Revenue Service announced today.

The IRS has seen a surge of these phone scams as scam artists threaten police arrest, deportation, license revocation and other things. The IRS reminds taxpayers to guard against all sorts of con games that arise during any filing season.

"Taxpayers across the nation face a deluge of these aggressive phone scams. Don't be fooled by callers pretending to be from the IRS in an attempt to steal your money," said IRS Commissioner John Koskinen. “We continue to say if you are surprised to be hearing from us, then you're not hearing from us.”

"There are many variations. The caller may threaten you with arrest or court action to trick you into making a payment,” Koskinen added. “Some schemes may say you're entitled to a huge refund. These all add up to trouble. Some simple tips can help protect you."

The Dirty Dozen is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter any time during the year. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so.

This January, the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam.

"The IRS continues working to warn taxpayers about phone scams and other schemes," Koskinen said. "We especially want to thank the law-enforcement community, tax professionals, consumer advocates, the states, other government agencies and particularly the Treasury Inspector General for Tax Administration for helping us in this battle against these persistent phone scams."

Protect Yourself

Scammers make unsolicited calls claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via a phishing email.

Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.

Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.

Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.

The IRS will never:

  • Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you don’t owe taxes, or have no reason to think that you do:

  • Do not give out any information. Hang up immediately.
  • Contact The United States Treasury Inspector General for Tax Administration (TIGTA) to report the call. Use their “IRS Impersonation Scam Reporting” webpage. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.

If you know you owe, or think you may owe tax:

  • Call the IRS at 800-829-1040. IRS workers can help you.

Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your "Taxpayer Bill of Rights". Explore your rights and our obligations to protect them on IRS.gov. 

Affordable Care Act

Are you an “Applicable Large Employer”?

Basic Information

  • Two provisions of the Affordable Care Act apply only to applicable large employers (ALEs):
    • The employer shared responsibility provisions; and
    • The employer information reporting provisions for offers of minimum essential coverage
  • Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year.  If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year.  Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. Employers who are not ALEs may be eligible for the Small Business Health Care Tax Credit.
  • If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions.
  • To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12.

Full-time Employee

full-time employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month.

Full-Time Equivalent Employees

An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

  1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
  2. Divide the total by 120.

An employer’s number of full-time equivalent employees (or part-time employees) is only relevant to determining whether an employer is an ALE.  An ALE need not offer minimum essential coverage to its part-time employees to avoid an employer shared responsibility payment.  A part-time employee’s receipt of the premium tax credit for purchasing coverage through the Marketplace cannot trigger an employer shared responsibility payment

 

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