Job Discussion Forums

[raulyn]

I worked in the USA from Jan to June in 2009 and then finished the year here in D.F.
I am sure I should file my income taxes for the work I did in the USA but how do I include the income I made here in Mexico?
Can anyone tell me how to do this? MANY THANKS!

[amaranto]

In addition to the 1040, you will have to file another form. I filed an F4506t to report my foreign-earned income. You may be able to claim certain exemptions or credits. All the forms are available on the IRS website, as well as the addresses and fax numbers you'll need.

You may need to file an additional form(s) depending on several factors. I would suggest reading the instructions for claiming foreign-earned income that are on the site. They're kind of long, but really helpful.

[Tretyakovskii]

Like so many questions that get asked here, a great deal could be said/ought to be said, to give a full response, but I'll just throw out a couple of things.

It's my understanding, longstanding now, that if you are employed abroad, you needn't pay social security taxes in the U.S. on your foreign earned income (you do on any self employment income you may have). You need to report your foreign earned income, whether from employment or from self employment. You could do this on form 1040.

If you're careful to stay out of the U.S., except for brief periods during the first year you work in Mexico, you should be able to go back and claim a refund on any income taxes you paid in the U.S. on your Mexican wages by filing an amended return in which you claim the "foreign earned income exclusion". To be able to apply it to your 2009 earnings, you'll need to have been out of the U.S. for at least 330 days of the 365 that began when you first entered Mexico to work. (When I have time, I'll look for a form you could use to let the IRS know you intend to claim the exclusion, and perhaps avoid the process of having to pay, then ask for a refund.)

You've got till June 15 to file a return, in any case, if you're living abroad.

If you continue to live and work in Mexico through the end of 2010 you will be able to assert a right to the exclusion of foreign earned income based on your bona fide residence in a foreign country for a calendar year: after that, should you continue to live and work abroad, not returning to the U.S. to live, you'll be able to maintain this tax status indefinitely.

[amaranto]

That's a nice, concise summary of the instructions for filing; it would have saved me 3 hours of headache!

Unless you earned a lot of money in Mexico (something over 93,000 dollars) during the last fiscal year, Tretyakovskii's description for filing is the simple solution.

Does anyone who has done this for years have any advice? This year was the first time I filed income taxes for money earned abroad, and I would like to know if I did this correctly.

[Tretyakovskii]

I've done over thirty of these, with no kickback from IRS; bearing in mind this is a forum, and no more than people sharing their thoughts and experiences, if you had a particular question about the process and I had given thought to it myself, I'd be happy to share my thoughts with you about it.

[Tretyakovskii]

Raulyn, if your 330+ full days out of the U.S. would be reached before June 15th, you could file your 1040, and form 2555 (to claim the foreign earned income exclusion) at any time after you'd gotten to the 330+ mark, and on or before June 15th.

If not- but you would reach the magic number by Oct 15, you could file a request for an automatic extension of time to file your return, using form 4868, then file your return on or before Oct 15, but after passing the 330+ number of days out of the U.S.

The day you arrive in Mexico, and the day you depart, do not count toward the total of 330+.

Any taxes due on your income for 2009 would have to have been paid by April 15 to avoid interest/penalties that might attach to "late payment".
__________________

I did find the form I'd referred to in which you inform the IRS that you expect to qualify for the exclusion of foreign earned income for part of 2009 (form 2350), but could see no advantage to using it, in your situation.
__________________

In general, be cautious when answering any question which seems to imply an intention on your part to return to the U.S. to live, always responding with something non specific, such as "I have no plan, at this time, to return to the U.S., except for occasional visits". This becomes important if you later want to claim the tax status of "bona fide foreign resident" which has the advantage of having no limit to the number of days you can be in the U.S., so long as it is not your intention to relocate to the U.S., and you do not do so.
__________________

Save your boarding passes, each year, or any other evidence you may have, as you will need to know the exact dates you entered and left the U.S. to complete form 2555.

For those who would like to study these questions further, there is Publication 54, available on line at www.irs.gov