Do I Need to File US Taxes on Income From Another Country?
If you live in the US and have a bank account, rental property, a business or family money in another country, the IRS may expect to hear about it — even if you already paid tax there. Here's what applies and how to stay compliant without paying tax twice.
By the Enrolled Agents and CPAs at A&W Tax Services · Updated
The basic rule: worldwide income
US citizens, green card holders and anyone who meets the substantial presence test are US tax residents. Tax residents report their income from every country — wages, rent, interest, dividends, business profits and gains from selling property abroad — on their US return.
The substantial presence test generally makes you a resident if you were in the US at least 31 days this year and 183 days over three years, counting all of this year's days, one-third of last year's and one-sixth of the year before.
Avoiding double taxation
- Foreign tax credit (Form 1116) — a credit for income tax you paid to another country on the same income
- Tax treaties — the US has income tax treaties with many countries that can reduce or settle which country taxes certain income
- Foreign earned income exclusion (Form 2555) — only for people who live and work abroad and meet the bona fide residence or physical presence test; it doesn't apply to income earned while living in the US
Reporting foreign accounts: FBAR
If the combined value of your foreign bank and financial accounts was more than $10,000 at any time during the year, you must file an FBAR (FinCEN Form 114). It's filed separately from your tax return, is due April 15 and is automatically extended to October 15. The accounts count even if they earned no income, and accounts you hold jointly with relatives count too.
Form 8938 for larger amounts
Separately, Form 8938 is filed with your tax return when your specified foreign financial assets are above certain thresholds. For a single person living in the US that's more than $50,000 at the end of the year or more than $75,000 at any time during the year; for married couples filing jointly it's $100,000 and $150,000.
Gifts and inheritances from abroad
Money you receive as a gift or inheritance from a foreign person generally isn't taxable income to you, but if the total from foreign individuals or estates is more than $100,000 in a year, you must report it on Form 3520. Penalties for missing that form can be significant even though no tax is owed.
Behind on reporting?
Penalties for unfiled FBARs and foreign-income forms can be large, but the IRS offers streamlined procedures for people whose failure to report was not willful. An Enrolled Agent can review your situation, file what's missing and help you choose the right way to get compliant.