The United States has a 'worldwide' concept of taxation, and therefore it taxes its citizens and resident aliens on all income regardless of where it was earned. The taxation of foreign source income is one of the most fascinating areas of the Internal Revenue Code. U.S. citizens living abroad are taxed on their foreign source income, but they may qualify for the Foreign Earned Income Exclusion, or if they pay foreign taxes, may qualify for the foreign tax credit. This course takes you on a journey through the ins and outs of foreign earned income, the qualification for the foreign earned income exclusion, and foreign tax credits for individuals.
Upon successful completion of this course, participants will be able to:
- Identify what payments qualify as foreign source income and explain how this income should be reported.
- Recall how a U.S. taxpayer can qualify for the foreign earned income exclusion.
- Recognize how to allocate taxes paid to one of two categories of income: passive (interest) or general (wages).
- Cite how a taxpayer can qualify for bona fide residency status in a foreign country.
- Identify how a taxpayer should prorate the foreign earned income exclusion when living in a foreign country for part of the year.
- Note the tax laws that apply to moving expenses incurred while relocating to a job location in a foreign country.
- Identify Section 901(j) income.
- Recognize deductions into one of fifteen classes of gross income.
- Recall how foreign income exempt from state tax should be handled for tax purposes.
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