Dealing with Foreign Wages
The answer, not surprisingly, is yes. But US citizens working abroad have several tax breaks available to them to ease the burden of filing in two countries. In the US they may be able to exempt some or all of their foreign wages from US income taxes, up to $87,600 for 2008. This tax break is called the foreign earned income exclusion, and it applies only to foreign wages or self-employment income.
Another benefit available is the foreign tax credit. This is a credit against US income taxes for taxes paid to foreign governments. The credit applies to any type of foreign income, such as wages, interest or dividends. The foreign tax credit is a handy tax break for investors too, who might have paid foreign taxes on stocks or mutual funds with foreign holdings.
In addition to these two basic tax breaks for taxpayers with foreign income, the US also has tax treaties with various countries around to world. These treaties specify how certain types of income are going to be taxed. In the case of the reader working for a Canadian employer, that treaty specifies conditions under which wages will be taxed only in one country.
People working, living, or doing business abroad have one final consideration, and that's reporting any bank accounts they have outside the United States. This is an annual report submitted to the Treasury Department. The Treasury uses these reports as part of its ongoing efforts to combat money laundering. US citizens must file this report if their total balance in all foreign bank accounts is $10,000 or greater at any time during the year.
Form 990 for Nonprofit Organizations Due May 15th
Some nonprofits might be eligible to file a shorter return, a 990-EZ. To qualify for this shorter form, the nonprofit would need to have under $100,000 in gross receipts and less than $250,000 in total assets as of the end of the year. Even smaller nonprofits may not have to file either the 990 or 990-EZ if their gross receipts are normally less than $25,000 annually. Such organizations are eligible to file an electronic postcard, called 990-N, which will suffice to meet their filing obligations.
One of the advantages to file these information returns, is the return data shows up in publicly searchable databases, such as the one found at Guidestar.org. Information from the returns such as how the organization used its funding, and its own description of the programs and services offered are searchable by grantmakers and donors. This means a well written 990 has potential to attract the attention of donors searching for specific types of nonprofits.
Additional resources:
- Resources for Filing IRS Form 990 (About.com)
- Tax Information for Charities & Other Non-Profits (IRS.gov)
- Financial Concerns for Nonprofits (About.com)
Q&A About the Stimulus Rebates
Some of the questions concern when the rebate will be received, how much a person qualifies for, and some direct deposit issues that have arisen.
It's surprising how many different direct deposit issues the IRS discusses in a separate FAQ dealing just with direct deposit issues. In fact this page helped answer a perplexing question sent in by one reader. She paid her taxed using the electronic withdrawal feature available in tax software programs. Since the IRS had her bank account information, she naturally expected to receive the rebate by direct deposit to the same account. It turns out, however, that the IRS will be mailing checks to people who used this electronic payment feature. (No reason is given for why the IRS couldn't just use the bank information to issue a direct deposit, but I suspect there might be some sort of technical explanation involved.)
Similar issues have arisen around various loan products issued by retail tax franchises and software companies. Taxpayers who used direct deposit in conjunction with a refund anticipation loan or a refund anticipation check will receive their rebate by check as well.
If you have questions about your rebate, you can use the Where's My Stimulus Payment? application on the IRS Web site, or call the IRS at 1-800-829-1040.
More resources:
Tracking Down Your Tax Refund and Stimulus Rebate
Is Tax Privacy Still Important?
Here in the United States, tax return information is confidential under federal law. There are stiff penalties for tax professionals or IRS agents who disclose tax information without your explicit authorization. Some states, however, post the names and addresses of people or businesses who are in arrears in paying their taxes. And even federal tax debts can become a matter of public record if the IRS files a tax lien against you.
So what can you do to ensure that your tax privacy is protected? It helps to begin by identifying who has access to your tax and financial records. Make sure your accountant and family members understand this information is confidential and ought not to be disclosed. Accountants are required to maintain the confidentiality of your records, and so you might want to review any privacy policies they have. Second, make sure your tax records and any electronic files are password-protected, or stored to a secure media. For example, you might want to place PDF documents and tax software files into a ZIP file that's protected by a strong password. And, finally, if you are in a situation where you owe taxes, make sure you set up a payment arrangement as soon as you can. This will help prevent the government from releasing your contact information on their Web site and may prevent them from filing a lien against you.
New Scam for Tax Rebate Checks
If you receive a call, you can safely assume the caller is up to no good. The IRS does not call taxpayers (or email them) to initiate any sort of communication. If the IRS needs additional information or wants to tell you about a correction or discrepancy, they will send you a letter. Here's the Service is saying about this new telephone scam:
"Some people have received phone calls about the economic stimulus payments, in which the caller impersonates an IRS employee. The caller asks the taxpayer for their Social Security and bank account numbers, claiming that the IRS needs the information to complete the processing of the taxayer's payment. In reality, the IRS uses the information contained on the taxpayer's tax return to process stimulus payments, rather than contacting taxpayers by phone or e-mail."As for tips for handling such a call, the Prime Time Money blog has this suggestion: "If someone calls and says they are from the IRS or Social Security Administration (SSA) and they need information from you just hang up the phone. The IRS and SSA already have all the information they need on you, and they certainly wouldn’t call you up to ask you."
As for email scams, those are easy to identify too. The IRS has adopted a policy of never initiating contact via email, and so all emails claiming to come from the IRS can be safely ignored. Or better yet, you can forward the email to a special IRS inbox so the agency can track down the perpetrators at phishing@irs.gov. The agency prefers if you "show all headers" in the email before forwarding it, and they provide instructions on how to do this.
Stimulus Rebates Ahead of Schedule
In her article, Bell also noticed that in this first round of rebate checks will be mailed out during the 4th of July week. "How convenient that the last of the mailed checks will go out Independence Day week. Surely that's just serendipitous ... Not!" And the Associated Press has noticed that the President discussed the rising cost of gasoline and groceries, a shift from his earlier comments about boosting consumer spending. "By saying expressly that people could use these one-time checks to pay for such necessities as food and gas, Bush underscored the deepening challenges facing the economy."
Personally, I have a pretty good idea of what I'll use my own rebate check for. It will sit in my savings account for month or so, and then go right back to the feds when I pay my second quarter estimated taxes. Other friends, clients, and business colleagues have said they will use the rebate either to pay their taxes or pay down their credit cards. And this echoes the results of a poll conducted by About Financial Planning. When asked "What would you do with the proposed tax rebate?," forty-five percent of respondents said they would use the money to pay off debt.
For the official information about the rebates, see the following IRS Web pages:
Some Thoughts on the Mortgage Deduction
The basic idea is you can deduct interest on a loan of up to a $1 million if the proceeds are used to buy, build, or improve a home. You can also deduct interest on a home equity loan of up to $100,000. In the tax law, a home equity loan is any loan whose proceeds are not used to buy, build or improve a home. So most people naturally remember this $1.1 million dollar limit.
The question posed by the reader got me to thinking. There's another limit for home equity loans. The interest may not be deductible if the loan amount exceeds the fair market value of the home. And that means some people who have seen their homes decrease in value might end up with mortgage interest that isn't fully deductible. That's a heart-wrenching thought when every dollar of tax savings can really help. The point to remember is this only applies to home equity loans, not to "acquisition debt." So if you're home as declined in value and your only loans were for buying, building, or improving the house, then you will be able to continue deducting your interest.
Things to Do After Filing Your Return
The most immediate concern is checking on the status of your refund. If your refund hasn't been deposited to your bank account or been mailed to you in the three to four weeks after you filed, you can check its status on the IRS Web site using the Where's My Refund application. You should allow at least 7 days from the time you file your return before checking with the IRS.
You will also want to find out how much of the stimulus rebate you might receive later this summer. The IRS has an Online Stimulus Payment Calculator. Simply type in some numbers from your completed tax return and you'll see how much of an additional rebate you'll be receiving. The IRS has also posted a schedule of when these payments will be sent out.
Now may be the time to adjusted your paycheck withholding. By adjusting your withholding, you'll make sure that you have just enough money deducted from your paycheck to cover your taxes, but not too much to have a huge refund, nor too little to have a sizable balance due. You can calculate how many withholding allowances to claim using the IRS' withholding calculator, and then use those figures to fill out a new W-4 and submit it to your employer's payroll department.
You will also want to keep your finished tax returns in a safe place. You'll want to keep a copy of the return, plus any supporting documents, for at least three years. That's how long the IRS has to ask any additional questions (a.k.a. audit) your return. Along with the actual return itself, you will want to retain copies of any tax software you downloaded or purchased, in case you need to run the software again to make changes. My own tax drawer has been growing lately, and so I've decided to save copies of my returns in a PDF file format, along with scanned images of my supporting documents. This could be easily stored on a thumb drive and put in a safe deposit box as a backup copy in case I lose my paper files.
File an Extension in about 6 Minutes
- TaxACT free extension e-file and related instructions
- TaxCut extension e-file (not free, requires payment of at least $19.95) and related instructions