Schedule E Tax Tips

"Hi, I'm Tom Choisnet, enrolled agent. We're going to talk now about foreign income. And I'm talking about here, income where you've paid tax in another country because you were paid in that country's currency. I have a baseball liaison guy as part of my practice and he's paid in yen, he works for Japan. And what happens there are, there is a worldwide tax treaty. And in the United States you're given credit for whatever taxes you paid the foreign entity. So we convert the income to US dollars and then take the proportion in the amount of taxes and credit against the Unites States' tax. If the US tax is a little more, you do pay the difference but quite often we find that it's pretty much a wash so you only have to pay taxes on foreign income to one source. Also look for foreign tax credit on your mutual fund. That's usually listed on the 1099s that list the various forms of income. Look for it and particularly if it is a foreign stock like your diamond stocks and foreign oil producing stocks. Thank you, I'm Tom Choisnet."