Tips for U.S. Taxpayers with Foreign Income

Did you live or work abroad or receive income from foreign sources in 2013? If you are a U.S. citizen or resident, you must report income from all sources within and outside of the U.S. The rules for filing income tax returns are generally the same whether you’re living in the U.S. or abroad. Here are seven tips from the IRS that U.S. taxpayers with foreign income should know:

1. Report Worldwide Income.  By law, U.S. citizens and resident aliens must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. File Required Tax Forms.  You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. See IRS.gov for more information.

3. Consider the Automatic Extension.  If you’re living abroad and can’t file your return by the April 15 deadline, you may qualify for an automatic two-month filing extension. You’ll then have until June 16, 2014 to file your U.S. income tax return. This extension also applies to those serving in the military outside the U.S. You’ll need to attach a statement to your return to explain why you qualify for the extension.

4. Review the Foreign Earned Income Exclusion.  If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $97,600 of your wages and other foreign earned income in 2013. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.

5. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce the amount of taxes you have to pay if both countries tax the same income.

6. Get Tax Help Outside the U.S.  The IRS has offices in Frankfurt, London, Paris and Beijing. IRS staff at these offices can help you with tax filing issues and answer your tax questions. Visit IRS.gov for more information.

You can get more on this topic in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. IRS forms and publications are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Taxation of U.S. Resident Aliens
• Publication 514, Foreign Tax Credit for Individuals
• International Taxpayer

Three Tips to Make Filing Less Taxing

Doing your taxes doesn’t have to be taxing. You can make preparing and filing your federal income taxes easier by following these six tips from the IRS:

1. Don’t delay.  Avoid doing your taxes at the last minute. If you rush to make the filing deadline and file a tax return on paper, you may overlook tax savings. You’re also more likely to make a mistake. An error will usually delay your refund and often causes the IRS to send you a letter.

2. File on time.  If you owe taxes but can’t pay by April 15, you should still file on time and pay as much as you can. This will minimize penalties and interest charges. If you can’t pay all the tax you owe, you may apply for an installment agreement. The best way to apply is to use the Online Payment Agreement tool on IRS.gov. You can also apply by mail using IRS Form 9465, Installment Agreement Request.

3. File an extension.  If your tax return is not ready by April 15, you can get an automatic six-month extension. You can also get an extension using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You should e-file or mail Form 4868 and pay any tax due by April 15.

Visit IRS.gov to get the tax forms you need. You can also call 800-TAX-FORM (800-829-3676) to have them mailed to you. Allow at least 10 days for mailing.

Eight Common Tax Mistakes to Avoid

We all make mistakes. But if you make a mistake on your tax return, the IRS may need to contact you to correct it. That will delay your refund.

You can avoid most tax return errors by using IRS e-file. People who do their taxes on paper are about 20 times more likely to make an error than e-filers. IRS e-file is the most accurate way to file your tax return.

Here are eight common tax-filing errors to avoid:

1. Wrong or missing Social Security numbers.  Be sure you enter all SSNs on your tax return exactly as they are on the Social Security cards.

2. Wrong names.  Be sure you spell the names of everyone on your tax return exactly as they are on their Social Security cards.

3. Filing status errors.  Some people use the wrong filing status, such as Head of Household instead of Single. The Interactive Tax Assistant on IRS.gov can help you choose the right one. Tax software helps e-filers choose.

4. Math mistakes.  Double-check your math. For example, be careful when you add or subtract or figure items on a form or worksheet. Tax preparation software does all the math for e-filers.

5. Errors in figuring credits or deductions.  Many filers make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, and the standard deduction. If you’re not e-filing, follow the instructions carefully when figuring credits and deductions. For example, if you’re age 65 or older or blind, be sure you claim the correct, higher standard deduction.

6. Wrong bank account numbers.  You should choose to get your refund by direct deposit. But it’s important that you use the right bank and account numbers on your return. The fastest and safest way to get a tax refund is to combine e-file with direct deposit.

7. Forms not signed or dated.  An unsigned tax return is like an unsigned check – it’s not valid. Remember that both spouses must sign a joint return.

8. Electronic filing PIN  errors.  When you e-file, you sign your return electronically with a Personal Identification Number. If you know last year’s e-file PIN, you can use that. If not, you’ll need to enter the Adjusted Gross Income from your originally-filed 2012 federal tax return. Don’t use the AGI amount from an amended 2012 return or a 2012 return that the IRS corrected.

Energy-Efficient Home Improvements Can Lower Your Taxes

You may be able to reduce your taxes if you made certain energy-efficient home improvements last year. Here are some key facts that you should know about home energy tax credits.

Non-Business Energy Property Credit

• This credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This includes items such as insulation, windows, doors and roofs.
• You may also be able to claim the credit for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. Each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
• This credit expired at the end of 2013. You may still claim the credit on your 2013 tax return if you didn’t reach the lifetime limit in prior years.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment and wind turbines.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home.
• This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get it on IRS.gov or order it by mail by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Publication 17, Your Federal Income Tax

SBA Improves Small Businesses Access to 7(a) and 504 Loan Programs; Enhances Job Creation

WASHINGTON— U.S. small businesses will gain improved access to two major government-guaranteed loan programs once a final rule to that effect issued by the U.S. Small Business Administration becomes effective April 21, 2014.

The SBA recently published a Final Rule on the Federal Register that eliminates or revises several requirements for its two main loan programs, 7(a) and 504. The rule expands eligibility, makes it easier for small businesses to secure SBA-backed financing, and encourages job creation.

“These 504 and 7(a) program enhancements will expand program eligibility and improve access to capital for small businesses.  Improvements in CDC corporate governance oversight enhance program integrity and encourages more local involvement,” said Ann Marie Mehlum, SBA Associate Administrator for the Office of Capital Access.

The changes include, but are not limited to:

• Elimination of the personal resource test which benefits borrowers by adding flexibility  in the management of their allocation of personal resources to the small business;
• Elimination of the nine-month rule for 504 eligible project expenses which allows businesses a longer timeframe in which to organize and initiate their small business project;
• Revised 504 loan program collateral requirements to allow Third Party Lender to take collateral in addition to Project collateral under certain conditions; and
• Enhanced CDC corporate governance requirements to ensure more board accountability and to reduce risks to the SBA portfolio.

For the full text of the Final Rule as published on the Federal Register, visit this link.

Tips if You Can’t Pay Your Taxes on Time

If you find you owe more than you can pay with your tax return, don’t panic.The key isto file on time. This way you won’t have a penaltyfor filing late.

Here are a few options if you can’t pay all your taxes by the April 15 due date.

1.  File on time and pay as much as you can. File on time to avoid a late filing penalty. Pay as much as you can to reduce interest charges and a late payment penalty. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options. 

2.  Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.

3.  Use the Online Payment Agreement tool. You don’t need to wait for IRS to send you a bill before you ask for a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return.

4.  Don’t ignore a tax bill. If you get a bill, don’t ignore it. The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering a financial hardship, the IRS will work with you.

In short, remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can.