Hi David,
Regarding form 2555, if a person is earning x income in x currency in some foreign country, how do you make the entry in Part IV for "ALL TAXPAYERS", line 19 "Amount in US dollars".
Should you use the current exchange rate at the time of filing, or at the end of the calendar year?
Thanks!
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david ingram replies:
Depending on the country you are living in, there is an average exchange rate for each country each year. Since earned income is usually paid in periodic installments, it makes sense to use the average rate for the year unless You are using a partial year where there was a material change in the exchange rates through the year.
The 2006 average exchange rates published for 2006 by the Bank of Canada can be found at http://www.bank-banque-canada.ca/pdf/nraa06.pdf
The monthly averages for 2005, 2006 and 2007 and annual rates back to 1997 can be found at : http://www.bank-banque-canada.ca/en/rates/exchange_avg_pdf.html
------------------------------------------ QUESTION:
Hello,
I and my wife, both US citizens, plan to move to Dubai for 2 years. We will both be working in jobs over there. We have a house here which we would like to keep. What are our tax implications? How much tax would we pay on an estimated combined income of $250,000 US per year? What would change if my wife quit her job - annual income would drop to $150K. We also own a startup business in the US which we expect to keep going and generate some income. How does this impact us? What would you suggest is the best way forward in our case? What services can you offer - we are in Austin TX.
Would greatly appreaciate a response. Thank you in advance for your time.
Regards,
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david ingram replies:
Your wife and yourself will be tax free on up to about $82,400 (may be indexed for 2007) prorated over the number of days you are out of the US provided you are out of the USD for a full calendar year or 330 out of 365 days. To claim this exemption, you both must file from 2555 which you can see at:
http://www.irs.gov/pub/irs-pdf/f2555.pdf
The instructions are at:
http://www.irs.gov/pub/irs-pdf/i2555.pdf
We would be happy to look after your out of Country US returns.
If your wife quit a $100,000 a year job, you would be out the $100,000 less about $22,000 income tax (on a prorated averaged basis).
You would still be taxable on the $150,000 less the $82,000 exemption.
Another problem if your wife does not work is that she may spend too much time in the US and you 'could' lose your exemption if you are not careful because you will want to join her.
To allow you to be out of Dubai for more than 30 days in 365, it is better to claim the bonefide residence provision than the 330 out of 365 days exemption. If you file form 2350 to extend the filing of your return, you can claim the bone fide residence for all years provided you are officially in residence in Dubai for a full calendar year meaning from Jan 1 to Dec 31st. The way the system works for instance is that being an official Dubai resident from jaqn 1 2008 to Dec 31 2008 woul dallow you to use Oct Nov and Dec of 2007 and Jan to Sept 2009 as exempt time. However, to qualify the two or thgree months in 2007, you have tio file form 2350 which you can find at.
http://www.irs.gov/pub/irs-pdf/f2350.pdf
You will have a problem finding someone locally who truly understands these forms. If you decide that I am too far away, Gary Gauvin in Rockwall, Texas is my old business partner in Ottawa, Canada and very experienced in out of country return. His phone number is (469) 273-3399. His web-site is www.garygauvin.com and if you go to google and type - income tax expert - into the search engine, he and I are usually in the top five.
If you type - US Dubai Income Tax Expert - you will be amazed. At any one time, I usually have 20 or 30 clients in Dubai so you would not be alone.
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when i am out of town. expert US Canada Canadian American Mexican Income Tax help
However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. As an example, as I write this on Sept 2, 2007 (the day before I turn 65), since June 16th (78 days), my 'spammed out' box has 24,417 unread messages, my deleted box has 8063 I have actually looked at and deleted and I answerd 576 email questions for clients and strangers. I have also put aside 472 messages that I am maybe going to try and answer because they look interesting. -expert US Canada Canadian American Mexican Income Tax help
Therefore, if an email is not answered in 24 to 36 hours, it is lost in space. You can try and resend it but if important, you will have to phone to make an appointment. Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321. expert US Canada Canadian American Mexican Income Tax help.
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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My Home office is at:
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Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax help.
email to taxman at centa.com
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Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included." expert US Canada Canadian American Mexican Income Tax help.
David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. expert US Canada Canadian American Mexican Income Tax help.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax Immigration Wizard Antarctica Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention. expert US Canada Canadian American Mexican Income Tax help.
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