Taxes on worldwide income are payable to U.S. citizens, residents, foreign nationals, immigrants, and employees of foreign contractors. Additionally, in Dallas, you have to prepare a return of income taxes if you meet the minimal filing threshold. The foreign-earned income exception is now accessible to contractors and employees of private companies that serve the U.S. Armed Forces in defined battle zones. You can now see how complicated the process of preparing your income tax return is. If you get confused, contact tax resolution services in Dallas.
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Is there any exclusion of combat-zone contract workers on foreign-earned income?
The amount of income that is exempt from taxes for US government employees, both military and civilian, is already stated on Form W-2. In other words, the income reported to the IRS already takes the battle zone exclusion into consideration. Regarding the battle zone, there are no specific forms to complete.
On Form 2555, however, defense contractors and their workers must report their overseas earned income exclusion. This form establishes how much of the exclusion a person is qualified for. As the Combat Zone Tax exception for contractors, this form is submitted with the balance of the year’s tax return.
Can You Exclude Your Foreign Assets and Investments from the Combat Zone Tax Exclusion for Civilians?
No, in order to be eligible for the Combat Zone Tax exception, US citizens may be asked to reveal any bank accounts, savings, and other financial assets maintained at foreign banks and financial organizations.
For example, if an American individual has a total balance of at least $10,000 across all of their international accounts at any point during the year, they must submit the international Bank Account Report (FBAR). This also applies to the civilian and contractor tax exemption in combat zones. This means that when these taxpayers submit their income tax return for 2018, they will be able to claim the overseas earned income exclusion, provided they are eligible. Up to a particular dollar threshold, taxpayers may elect to deduct their foreign-earned income from their gross income under the exclusion. The maximum dollar amount for the overseas earned income exclusion for the 2018 tax year is $103,900.
The exclusion of overseas earned income is not known. Each year, qualified taxpayers are required to submit a U.S. income tax return with a Form 2555 or Form 2555-EZ affixed. The money a taxpayer gets for rendering personal services in a foreign nation or country while satisfying the following criteria is known as foreign earned income.
- He or she has a foreign tax residence, and
- He or she fulfills the physical presence or bona fide residence requirements.
Past-due Returns
The current IRS amnesty program allows contractors who are overdue on their U.S. income tax returns to catch up and avoid fines. The Streamlined Filing Compliance Procedure is the name of the project. Whin Global can help and make making up simple, convenient, and inexpensive.
Which Tax Benefits Are Available to Military Contractors?
1. Exclusion of Foreign Earned Income (FEIE)
A specific amount of foreign-earned income can be exempted from taxes for US citizens residing abroad thanks to the Foreign Earned Income Exclusion (FEIE). Every year, the FEIE exclusion rate is modified to keep up with inflation.
2. Credit for Foreign Taxes
You might be qualified for a dollar-for-dollar credit to reduce your US tax liability and prevent the possibility of double taxation if you pay taxes to a foreign government. The Foreign Tax Credit is the name given to this.
3. Exclusion (or Deduction) of Foreign Housing
The Foreign Housing Exclusion allows you to deduct certain foreign housing-related costs from your US tax bill as a military contractor working abroad.