Question

Tax Year Prior to 2020: Report foreign earned income to Form 1040

Forum|Forum|6 years ago
September 2, 2019
3 replies
0 views

I enter my foreign earned income by selecting select "A statement from my foreign employer (could be cash)" option in Turbo Tax. I see the income is shown in Line 1 in Form 1040 correctly. My question is do I need to attach any supporting document, e.g. W2 in my tax return? I don't have W2 for this income.

TurboTax Deluxe Windows

rjs

Employee

You do not have to attach a supporting document to your tax return for your foreign earned income.

P

pk12_2

Employee

@Sitkinyu Agreeing with @rjs as far as the question raised and looking for a little bit more information ro fully understand the situation---- > are you US citizen/Resident ( Green Card )? Which country are your earnings from? Is your employer a local entity or US govt /and admin. unit of US govt ? When did you move to the foreign country? Are you being taxed on your income in this foreign country? If you are not US citizen, which is your country of citizenship ? Is your family with you abroad?

S

SitkinyuAuthor

I am US citizen. Hong Kong. Local entity. I don't move to the foreign county and I don't work abroad. Foreign country don't taxed me.

rjs

Employee

@Sitkinyu wrote:

I am US citizen. Hong Kong. Local entity. I don't move to the foreign county and I don't work abroad. Foreign country don't taxed me.

Please clarify:

What country do you live in?

What country do you work in?

What country is the company located in that is paying you?

If you do not live or work in Hong Kong, what is your connection with Hong Kong?

C

ColleenB

I work overseas for a foreign employer and receive full paid benefits but they are labeling me as an Independent Consultant. I don't have an LLC or an S Corp. And when I say full paid benefits I get paid vacation, medical, pension, sick leave, etc. I believe I should be filing as an employee based on the above information. I tried calling the IRS which has actually been helpful to me in the past but now they just direct me to the website and I can't find an answer to this specific scenario. PLEASE Assist

C

ColleenB

I found my answer on the IRS website, Understanding Employee vs. Contractor Designation | Internal Revenue Service (irs.gov). I kept searching for anything official stating the difference between an employee and an Independent Consultant. It doesn't matter what an employer lists you as or has you agree to annual contract, if you are paid full benefits, you do a performance eval, work is regulated then you are an employee.

P

pk12_2

Employee

@ColleenB , while the information you found on the IRS site is correct, however, there a few things to note here:

(a) IRS has jurisdiction and therefore its rulings/ opinions etc. apply ONLY to entities in the USA. The employee definition that IRS uses/enforces assures compliance with FICA requirements and tax withholding rules. Thus as an employer, the entity is required to pay 50% of the FICA ( Social Security & Medicare ) , while employee bears the cost of the other 50%; is required to withhold federal and state personal income axes on "as earned " basis per paycheck.

(b) Foreign entities operate in compliance with local tax laws and definitions thereof. They generally are not obligated to withhold US taxes, share FICA costs etc. Thus while you may be an employee ( under US Tax laws), for US Tax Purposes, neither the FICA nor the tax withholding ( Federal and State) are affected. Many countries have totalization agreements with the USA , in order to ameliorate the FICA burden --- often you pay into one country and this is given credit and/or adjusted in the other country. The double taxation , again based on tax treaties between US and most countries, allows for exclusion of certain wages & self-employment earnings from US taxes upto a maximum and anything beyond this exclusion limit is taxed by both countries and US gives foreign tax credit in order to ameliorate the effects of double taxation.

Therefore , my conclusion is that whether you are treated as an employee or contractor under the local laws is immaterial for US tax purposes. Your worldwide earnings are still taxable income subject to tax treaty conditions and foreign earned income exclusion plus foreign tax credit rules and regulations.

Does this help and/or is there more I can do for you ?

pk