Foreign Dependents

[ILLMAS]

TP is a U.S citizen but lives in another country for many years, he has a family and children, he wants to submit a Form 2555 to declare foreign earned income, however he has no US earned income. I have multiple question:

Residency Test

TP lives year round out of the country, so what form should be prepared a 1040NR or 1040, again TP has no US income? TP was born in the US.

Dependent's

TP is married and has children, dependents do not have a SS# or ITIN's (dependents would qualify for ITIN's because of the country they live in), so if the dependents don't meet the requirements then they can be excluded from the return or does the IRS accept foreign personal identification numbers?

Form 2555

Since TP does n't have any earned income in the US and form 2555 is prepared, then TP return would be more like an informative return, don't know what good it would do for him, does anybody know how the IRS treats this type of returns.

Any other thoughts you might have or suggestions that can help me out?

Thanks

MAS

[ILLMAS]

I forgot to ask about the currency conversion, form 2555 requires to put down foreign income earned, how should i go to convert the currency to US dollars (i look up rates)? Would using today's rate be valid for most recent years and prior years?

Thanks

[Catherine]

I forgot to ask about the currency conversion, form 2555 requires to put down foreign income earned, how should i go to convert the currency to US dollars (i look up rates)? Would using today's rate be valid for most recent years and prior years?

Thanks

US citizens are required to report (& pay tax on) their worldwide income every year. Lots of expats get caught on this when they want to come home and realize they owe umpty gazillion $ in back taxes (and decide at that point to drop US citizenship and stay wherever they are, permanently).

Your TP will file a 1040, but it will have to be submitted on paper (see just below). The dependents need ITIN's; submit a W-7 for each of them with corroborating documentation. The whole kit & caboodle goes to the ITIN unit, which will assign ITIN's, add those to the paper 1040, and then submit the 1040 for processing.

Read the instructions for F 2555 closely, and don't forget the housing exclusion/deduction sections.

As for currency - you are supposed to use rate as of date paid. Easier for a person paid monthly than one paid weekly. I use www.x-rates.com for historical currency conversion rates. IF (and that can be a big if) the rate didn't vary too much during the year, an annual average will suffice. However, there are some currencies that have big swings against the dollar; for those doing an annual won't help and you might have to cleave it finer than that.

Don't forget the F-bar form either, for reporting foreign bank accounts!

Catherine

[Pacun]

The very FIRST thing you need to do is to look if the foreign country has a tax treaty with the US. It will also be helpful to have the tax return they filed with the foreign country and the last US return filed.

[MAMalody]

I have always thought that children born of a US citizen were US citizens. If that is so, would the children not be able to receive a SSN and not need an ITIN?

[Pacun]

Correct. But that will put the children (when they grow up) in the same situation of the father, filing taxes for a country they don't live in AND in the case of the children, a country they have never visited. ALSO, Having a US passport is a great thing when we visit allied countries but it could be a very dangerous thing elsewhere. Poster didn't say what country we are referring to, so a lot of speculations will be posted.