Income, Tax, and Deductions

Topics covered:

Do I need to upload receipts or bank statements?

No, we do not need your receipts or bank statements.

However, the TQ will generate a list of supporting documents we will need based on the answers you provide.

Retirement & Pension Reporting

Retirement accounts come in many shapes and sizes. For US tax financial reporting purposes, having a retirement account and/or receiving retirement income refers to US and foreign social security distributions, pension distributions, retirement accounts like 401(k), or rollovers/transfers between retirement accounts.

Please list ALL of these types of accounts in the Non-US Financial Account section of the Tax Questionnaire (TQ).

Pension distributions, Social Security distributions - US or foreign

Report on   Income > Passive income > Pension tab.

Lump sum pension distribution would be reported in the same place.

I took a pre-retirement age distribution from my Retirement Account

Early distribution from the retirement account is treated as pension distribution and should be reported on the  Income > Passive income > Pension tab.

If you make an early withdrawal from a US pension there will a penalty for early withdrawal. If foreign - then just regular tax.

Employer contribution to the pension

To report this, 

1. Upload the annual wage statement on  Income > Wages tab.

2. Answer  Yes to the Were contributions made to a no-US pension plan (whether yourself or by your employer)? question.

As a general rule, employee contributions to foreign pension plans are not tax-deductible. In certain cases (i.e. 7% employee contribution to the United Nations Joint Staff Pension Fund) they will be deducted as long as such contributions are spelled out in the annual wage statement.

Disability - Lump Sum or Monthly Payment

Report your foreign disability benefits in   Income > Passive income > Pension tab, question Did you receive Foreign (ie non-U.S.) retirement distributions?

Most often, disability is not earned income but it may be taxable. It is considered earned income if the disability is reported on W-2.  

As far as the foreign disability - it depends.  It is never taxable when payments are proceeds from disability insurance that was paid for (purchased) by the employee.

However, employer-paid short or long-term disability it is taxable depending on the treaty country. Generally, it may be taxable because the employer deducts it as an expense. If it is taxable in a foreign country, it is likely taxable in the US. However, any foreign tax paid will be credited against your US tax liability. If it is expressed on foreign employer pay stub it is also likely to qualify for FEIE.  If it is social security type disability, then this is not qualified for FEIE.

Do I include my pension as a foreign financial account?

You don't know the value of the pension as the value isn't computed until you retire. Thus, some practitioners take the position that defined benefit plan does not need to be reported on FBAR because the plan participant does not have the account in their name with control or signatory authority.

However, this advice contradicts the "Basic Questions and Answers on Form 8938" suggesting a "reasonable estimate" of the value of the defined benefit plan.

If you can reasonably estimate the value of the pension, enter the estimate as the maximum value.

If you cannot reasonably estimate, then enter the sum of distributions during the year as the maximum value.

If you cannot estimate and there were no distributions, then the account does not need to be reported.  

Child Support Reporting

Maternity or Paternity Pay

Report it on Earned Income > Income Outside of the U.S. tab. Specify the employer's details, then indicate gross wages/salary earned with this employer during the tax year. Don't forget to select the currency.

I receive child care benefits from the government

Not reportable. Alimony, on the other hand, is. 

I receive alimony

Report on Income > Other Income tab, question Did you pay or receive Alimony during the tax year?

My employer reimburses me for my children’s tuition.

Please report this in the  Other Income tab by answering the Child benefits of any kind question.

Examples of other items that may affect your taxable income that should be reported on  Other Income tab are:
  • cash and non-cash allowances from the employer
  • inheritance or gift from non-US person exceeding $100K
  • gifts you made in excess of $14K
  • non-custodial parent-child exemption

Reporting income from multiple employers

After you complete the details of the first employer, you can click the + Add Foreign Employer button.

This will allow you to provide details about the second employer (and so on if you have more to report).

I had both a salaried position and was self-employed during the year. 

Our Tax Questionnaire will ask you separate questions about each type of income. Please select all types of income that apply to your situation, then complete the respective sections of the TQ.

Do I have to provide information about my spouse's income?

Do I have to report my spouse's income?

The short answer is no. You don't have to.

However, it may be in your interest to file together. We will analyze your situation and advise you of this. This is one of the core services we offer to our clients.

My wife has a green card that has expired but not renounced. What are her tax return options?

Your wife is considered a U.S. resident for tax purposes until she officially renounces the green card.

Therefore she is required to file US tax returns. She can file jointly with you.

I file a joint return with my husband in our resident country. We will file separately in the US. How should I report the tax I paid myself?

Please prorate the tax you paid yourself using the total tax paid by the household at the rate of income distribution between the spouses.

Example: Your spouse earned $80,000 and you earned $20,000. You paid $10,000 joint tax. Pro-rate the tax paid for your share using your joint tax rate of 10% -  i.e. allocate $2,000 to the tax you paid.

I am married to a non-US citizen. Do I have to include their details in the TQ (and by extension my US tax return)?

If you are married, you must file as married and provide the IRS basic details about your spouse.

If your spouse is not a US citizen, information about your spousal income is optional and does not have to be included in your tax return (but doing so may be beneficial to you). This can be discussed with your accountant. We will make sure to take the position most beneficial to you.

I have an interest in a Foreign Partnership owned jointly with my husband.

Husband and wife partnership can be treated on U.S. tax return as a "qualified joint venture" (i.e. you and your husband each report their share of income/expenses on a separate Schedule C as Sole Proprietorship).

If your spouse is a non-US citizen/green card holder and will not be listed on your tax return filed separately, please only report your personal share of income/expenses on the Passive Income > Interest section. To display it, click Change Income Types button at the left, select I'm self-employed/independent contractor, click Next, select I earn interest, then click Close.

Unemployment Income Reporting.

Unemployment Income (Foreign and US).

US unemployment:

Report it on Income > Wages> Income From the US tab, question Did you receive royalties, unemployment payments or other miscellaneous income from US source?

Non-US unemployment

Report it on Income > Other Income tab, question Did you receive foreign unemployment benefits?

I have an Unemployment Electronic Payment Card from the Unemployment Insurance. 

This account is considered Social Security type and should not be reported.

Gambling or lawsuit settlement.

Report it on  Income > Other Income tab, question Did you have Lottery/Gambling winning or Law Suit Settlement?

I receive a distribution from a trust (Foreign or US).

Report it on Income > Corporation & Trust > Trust tab, question Did you receive cash or property distribution from a Trust (whether US or Foreign)?

I received a gift or inheritance from a non-US person (non-citizen, non-GC holder).

Report it on  Income > Corporation & Trust > Trust tab, question During the filing year, did you receive inheritance or gifts from a non-US person?

I received an inheritance or gift from a US person (Citizen or GC holder).

This is not reportable to the recipient. If gift donors are US persons, they can gift up to $14k each per year without reporting. Any larger amount is reportable by the donor, not by the recipient on form 709.

Education Related Income Reporting

I receive a graduate student stipend

Report it on Income > Wages > Income Outside of the U.S., question Gross wages/salary earned during the tax year. Please, specify the currency.

I am a part-time tutor

Report it on Income > Self-Employment tab. Indicate your service. 

I received a distribution from a US educational plan.

Report it on  Report it on Income > Corporation & Trust > Trust tab, question Did you receive cash or property distribution from a Trust (whether US or Foreign)?

Farm Income Reporting

Report it on  Income > Self-Employment tab. Indicate your service. 

Farm subsidies are also considered Earned Income. They are government payment for future proceeds from farming (earned income). If a farm does not operate, it does not receive the subsidy.

Real Estate Reporting

I own a rental property

Report it on Income > Passive Income > Rental Income.

I rent my home for a few weeks a year via Airbnb (or similar platform)

Report it on  Income > Passive Income > Rental Income. Airbnb is just the marketing agent. Otherwise, it is just a rental income.

I own a timeshare, how should I report it?

Although a timeshare can be sold, it’s only a transfer of the right to use the deed and is not considered a tangible asset.

Therefore, you do not report owning a timeshare to the IRS (like you would tangible real estate).

If you rent it out for less than 2 weeks, that income is tax-free but the losses are not allowed for deduction.

Sale of Real Estate

Report it on  Income > Home Sale.

I receive a rent subsidy

If the rent subsidy is paid by the government to assist a renter - this money is not reportable and non-taxable.

If this rent subsidy paid by your employer please report it on Income > Wages > Income Outside of the U.S. tab in the question Did your employer provide an allowance on top of direct salary (car, education, home leave, etc.)?

Royalties Income Reporting

Royalties from publishing a book or from licensing a patent or other form of intellectual property, such as computer software product.

Report it on Income > Self-Employment tab. Indicate your occupation. 

All other royalties.

All other royalties should be reported in Income > Other income tab, question Did you receive royalties (whether US or foreign)?

How do I provide you information for preparation of Form 5471?

As you start the Tax Questionnaire, please indicate that you own more than 10% of a foreign corporation. You may also add information about your foreign corporation while working on your TQ. Simply click  Change Income Types button at the left. 

You should complete Income > Corporation & Trust > Foreign Corporation Tab then. You will be asked to complete a specific Questionnaire for Form 5471 and upload documents related to the company ownership.

We always refer to the “Tax Year” as the period from  January 1 – December 31 for all personal tax returns.

For corporate or trust returns, this may be either calendar year or the fiscal year with which your financials were prepared.

I can't break down my host country taxes paid between self-employment income, pension & wages income.

Please provide the grossed-up amount of tax paid as well as your tax return from the resident country. We will break it down for you. 

What is included in gross wages / gross income?

Gross wages means the total amount earned before any contributions or deductions taken out of that income.

For example, it means income  before working expenses AND before taxes.

I do not get statements about my local government Defined Benefit Scheme

Defined Benefit Schemes are not reportable to the IRS so you do not have to upload its statements.

I am not a US Citizen but have US-sourced income

There is a different version of the TQ that you must complete, called 1040NR Tax Questionnaire. Here is what you have to do:

  1. Browse to Tax Questionnaire section, then click Create New Questionnaire.
  2. In the Create New Questionnaire pop-up, specify the year for which you want to create the Tax Questionnaire.
  3. Make sure to answer None of the Above to the question about U.S. citizenship.
  4. Type the number of days you spent in the US in three calendar years. If you do not meet the Substantial Presence Test, you will be presented with the 1040NR version of the Questionnaire (it’s significantly shorter - less work for you :)

You will then see an NRA next to the Tax Questionnaires Tax year (i.e. 2015 (NRA).

Severance package - either monthly payment or lump sum

Report it on  Income > Wages > Income Outside of the U.S. tab, question Gross wages/salary earned with this employer during the tax year. Please specify the currency. 

Sick Pay

Report it on  Income > Wages > Income Outside of the U.S. tab, question Gross wages/salary earned with this employer during the tax year. Please specify the currency. 

Life insurance CASH payout (benefit payment is not reportable)

Report it on  Income > Corporation & Trust > Trust tab, question Did you receive cash or property distribution from a Trust (whether US or Foreign)?

Reimbursement from Medical Care

Not reportable.

What time period do you refer to as the Tax Year?

We always refer to the “Tax Year” as the period from  January 1 – December 31.

The Financial Year in my resident country differs and I can't provide a 31 December figure. What should I do?

In your resident country, the Financial Year may go from 1 July to 30 June. You may have a Self-Managed Superannuation Fund which is valued on Jun-30 each year, so you don't have a 31 December figure to give you. In this case, please provide a statement that was issued on the date closest to the end of the year (i.e. December of the calendar year for which return is filed or January of the next year).

Items of Expense Reporting

I pay alimony

Report on  Income >  Other Income  tab , question Did you pay or receive Alimony during the tax year?

I pay income tax in my home country

This applies to impots sur revenus in France; Einkommensteuer in Germany, Impuesto sobre la renta in Spain etc.

Report it on  Taxes & Deductions > Taxes Paid tab, question Did you pay any foreign tax on earnings (Wages, bonus) in the filing year? (i.e. Jan 1 - Dec 31 of the year you are filing for).

To calculate the taxes paid during the selected year, use  Calendar Year Income Calculator. Provide the figures in your resident country calendar (for individual months or the whole year), then copy the calculated amount earned during the tax year.

Social Security Contributions

Report it on  Taxes & Deductions > Taxes Paid tab, question Did you make contributions to a Social Security system during the tax year?

Personal contributions to the pension

Report it on  Income > Passive Income > Pension tab, question Did you make contributions to a U.S. IRA or ROTH IRA accounts during the filing year?

I have a retirement plan with an insurance company into which I make monthly payments from my after-tax income

Please report it as an Insurance / Annuity product on  Income > Investments tab.

Non-Income tax reporting

This applies to Church tax (Germany), Wealth tax (Switzerland, France, India), Council Tax (UK), Zakat (Saudi Arabia, Malaysia, Qatar), Taxe d'habitation (France).

Report it on   Taxes & Deductions tab, question Please list any other item(s) of income or expense that you think may impact your U.S. taxes.

How should the Irish special Universal Social Charge (USC) be reported?

USC is an additional income tax levy on highly compensated individuals and is considered a regular income tax.

Deduction Reporting

Travel Expenses 

This applies to moving the family from the US to Australia for work.

Report it on Taxes & Deductions > Deductions tab, question Moving expenses (provide a breakdown by specific expense type).

Medical and Dental Expenses

Report it on  Taxes & Deductions > Deductions tab, question Medical and dental expenses/insurance premiums (only if > 10% of gross income).

Home Mortgage

Report it on  Taxes & Deductions >  Deductions tab, answer Yes to question Did you own residential real estate during the tax year?. Then answer question Do you have a mortgage on the residence in which you live? and subsequent questions.

I work out of my house. Can I deduct my phone/electricity/etc. bills?

Report it on Income > Self-Employment, question Do you want to itemize your business expenses? Answer Yes to the question Is your office based out of your home?, then complete Office in Home section.

I use my car for work. Can I deduct the gas/other car expenses?

Report it on Income > Self-Employment, question Do you want to itemize your business expenses?  Answer Yes to the question Do you have auto-expenses?, then complete Auto Expenses section.

Educational Expenses

Report it on  Taxes & Deductions > Deductions tab, question Did you incur higher education expenses for yourself, spouse or dependents (college and beyond)?

Child Care Expenses

Report it on   Taxes & Deductions > Deductions tab, question Did you incur childcare or other dependent care expenses?, then provide the details.

Foreign childcare is also an eligible deduction. Child care (even abroad) is tax deductible and you should provide the details for it.

Can I (and how) deduct the money I have been paying my mother regularly to help her make ends meet?

If your mother

  1. Has U.S. Social Security number and
  2. You provide for more than half of her annual income

Then you can add your mother as a dependent and take a personal exemption of $3,900 on your tax return.

This is also unrelated to the Foreign Earned Income Exclusion and can be used in addition to it.

Can I claim to pay my daughter's college tuition, even if she files her own 1040ez?

You can deduct your daughter tuition as long as she is dependent on YOUR tax return.

She may file 1040EZ but should NOT claim personal exemption or you won't be able to list her as a dependent.

I am self-employed and take clients out for business

Report it on  Income > Self-Employment, question Do you want to itemize your business expenses?   

Will I be able to avail myself of the US-[my country] Double Taxation Treaty to assert a Treaty position that my income is not liable for US tax?

We will be able to advise on the best way to optimize your tax position in the course of your tax return preparation.

This is not, however, something that we discuss at the point of gathering your data in the Tax Questionnaire.

Can I deduct interest I have paid on personal loans?

No. Personal loan interest is not deductible.

You can only deduct home mortgage and higher education loan interest. 

Interest in personal expenses (car loans, credit cards, etc.) cannot be deducted.

Reporting Taxes Paid

My husband and I paid income tax on our income, salaries, and self-employment combined. How can I separate this?

If you file a  joint US return, there is no need to split the taxes you paid because all tax on earned income (husband and wife, wages and self-employment) will be used for the credit together.

If one spouse is a US person and only one person files, you should provide your personal ratio in joint earnings and report the portion of combined taxes based on that ratio. Or you can tell us how much each person earned and we will determine the breakdown of tax between two earners.

My employment contract states that my employer pays all of my local government taxes and my take-home pay is net of any tax they pay.  How do I reflect this in my tax questionnaire?

Your employment contract may state that your employer pays all of my local government taxes and your take-home pay is net of any tax they pay.  How do you reflect this in your tax questionnaire?

                             A. The IRS needs to know your gross pay (prior to any tax withheld) as well as the amount of tax paid (this benefits your tax position).  Your payslips, your employment contract, or your local tax forms should contain this information. 

Employment contract states that you receive $150K USD gross pay. Your employer pays $X to your local government in tax paid. If you can provide us with what $X is, your tax position will improve.

On your tax questionnaire, you report gross pay. If you can provide us with what $X is, your tax position will improve. Report that amount in the answer to question Taxes paid or withheld in the resident country.

Video - Using the Calendar Year Income Calculator

I can't find where to enter my wages!

Our TQ is done in a way that shows only the questions pertaining to your situation. You are asked to select the characteristics that apply to you while creating the TQ. Depending on your answers, we will show/hide certain sections of the TQ. To see the questions that refer to your wages, please select I earn a salary, then select I have income from the U.S. and/or I have income from outside the U.S. on the next page. 

Then, complete  Income > Wages > Income Outside of the U.S. and/or Income > Wages > Income from of the U.S. tabs.

If you can't see these tabs, simply click  Change Income Types button at the left, then select appropriate sections

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