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Question for the Money Doctors

Question submitted on Feb 7, 2013.

Question

I worked in india from jan 2012 thru sep 2012, total salary was equivalent to 45,000 usd. I moved back to the usa in october and earned 14000 usd for the time period from october to dec 2012.
Do i file taxes for the entire amount or the amount i made in the us ? If the total amount , do i get a tax deferred for the amount made in india?

Answer

Assuming you are a US citizen or a US alien resident, all of your income must be included onyour US tax return. For foreign earned income (the amount you earned in India) you can choose to exclude such income from a return if our tax home was in a foreign country and you met either a physical presence test of being in the foreign country for 330 full days, or rthe bona fide residence test - resides in a foreign country for an uninterrupted period of an entire tax year (January 1 - December 31). Based on your question, it does not appear that you meet either of these tests and therefore cannot choose to exclude the foreign earned income.

In order to prevent double taxation, if you paid taxes on your earnings to India, you can claim a credit for the taxes paid against your US tax liability. The calculation for obtaining this credit is somewhat complex. and you might need to consult a tax accountant who is well versed in such matters.

You can obtain additional information from IRS publications 54 and 4732 at http://www.irs.gov/publications/index.html


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