Well, I am finally making enough money that I have to claim my income to the IRS. I will have to pay income tax on the amount over a certain limit. I have an easy question, how do I prove to the authorities how much I make? I figure there is just some form I fill in to tell them. My wife thinks I probably need some sort of something my my Saudi employers.
Your thoughts?
Obviously from a U.S. employer it’s the W-2. But there is no universal form or IRS standard requirement covering earnings from all foreign countries - the tax year in some countries doesn’t even run to 12/31. You need to retain some kind of documentation of your earnings in case you’re audited, but I don’t think there’s a requirement to attach this to your tax return - I doubt that anything other than the standard U.S. forms would be processed by the IRS in any way. And many people file electronically now anyway.
You really need an accountant familiar with dealing with this stuff. Doesn’t your employer provide one? Any kind of foreign stuff gets quite complicated, dealing with the arcane Foreign Tax Credit rules to avoid double taxation.
Do your Saudi employers have something similar to the US-based W2 form?
By and large you do not need to prove your income. If the IRS has W2’s etc. with your SSN on it, they will check that you did report enough income, but if they have no such forms and you report income, they won’t question it. Why would they wish to do so?
In the old days you did have to attach a copy of your W2 to your 10440, but this was to verify your withholding. If you reported income above the amount shown, the IRS won’t question it. At least not in my experience and I’ve done so quite a few times.
I’ve been living in Panama for 25 years and I’ve never heard of a requirement to document your earnings. Just put down what you earn on the form. As has been said, AFAIK the main reason to have documentation is in case you get audited.
I qualify for the Foreign Earned Income Tax exclusion so I don’t pay income tax. I do have to pay payroll taxes (Social Security and Medicare), including the employer’s half since I am considered self-employed.
You may be aware of this already, but because of FATCA you also have to report foreign bank accounts of more than $50,000.
Actually, it’s $200,000 if you live outside the US.
Well, since we are getting into the weeds on this, what is the current limit beyond which I must pay tax?
Get thee to a tax accountant!
Seriously…you have asked a question which shows how much help you need.
And it is A LOT of help.
Not the kind of help we can give you here on this message board.
It looks like you are in serious violation of the law, and apparently have been for a long time.
Every American citizen living overseas must file forms with both the IRS and the US department of the treasury every year. Failure to do so can be a serious legal problem.
You say “I am finally making enough money that I have to claim my income to the IRS.”
This is hard to believe. Practically anybody who works for a living earns enough that is has to be reported, every year, for your entire working life.
And even if you don’t work…you have to report a LOT of information.
if you are a US citizen and have any bank accounts overseas, you have to report each and every account number and how much money it holds. This is to designed to catch money launderers, but the law applies to every citizen and every single bank account you have a signature on, no matter how small.( If the total of all the accounts is more than $50,000)It’s called the FBAR form, and must be filed electronically every year.
If you have not filed theFBAR or the regular 1040 Tax form for several years,there is a way to save your ass from some serious trouble. But you MUST go to a professional tax accountant and let them explain the laws to you. Basically, they can file the forms retroactively for the previous years, and quite possibly prove that you have owed no taxes , and sign it with their professional stamp. This will probably keep the IRs inspectors from paying attention to the fact that you have been violating the law brazenly.
Again, I say :YOU NEED PROFESSIONAL ADVICE from a legally qualified accountant who has lots of experience with American tax laws.
I am an American citizen living overseas, with the simplest financial life you can imagine…But my tax forms are about twenty pages long every year!
It sounds terrible,but it really isn’t too complicated.* But the first time you do it, GET PROFESSIONAL ADVICE.
*( A lot of it is information that has to be repeated and copied on separate forms. And my favorite: Form 2555, in which you report nothing except the fact that you live overseas ,is three pages long)
I have never used a tax accountant. I report my earnings, calculate my taxes and then subtract the taxes I pay to Canada and Quebec, always considerably more than my US taxes owed, fill out the appropriate foreign tax exclusion and send it in. They never question it. I don’t even owe any social security because Canada is considered to have an equivalent system. Once some IRS a-hole did question that and all I did was copy a page from the 1040 instruction and circle the sentence that says that and send it back. Never heard from them again.
I don’t know if the Canadian government shares income information with the IRS, but they will learn nothing if they do; I have no reason not to report it accurately. The FATCA is much much worse than the tax return.
I have contacted my attorney by e-mail. We will see what he has to say.
BTW, the 2017 limit is $109K, so I do owe taxes this year.
Failure to file FBAR (even once!) can get you on the lifetime permanent IRS audit list.
Good luck.
The limit he is referring to is most likely the Foreign Earned Income Exclusion. However, just because you can exclude the income doesn’t mean you shouldn’t file your taxes saying that all your income is excluded, along with all the other information about ownership of foreign accounts and such. Definitely get help from someone who knows US foreign tax law.