Tax Help - Do You Have Foreign Wages To Report?

US citizens living and working abroad have tax breaks available to them to ease the burden of filing in two countries.

The following are the breaks available for those residing and working outside of the U.S.:

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.

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.