# Tax software requires W2 ?



## christiana.prinn (Nov 12, 2017)

Hi,
I'm an expat with a low income (few thousands) from 2 sources:
1. Salary from foreign employer 
2. Interest on foreign savings account
* For both I payed taxes in the foreign country - there's a tax treaty.

Does anyone please know what tax forms this usually requires, in addition to 1040 ?
Over the years I've been successfully filing only 2555, 1116, schedule B & D, and 8938.
These reports were successfully approved by my accountant & by the IRS.

However, now I'm trying a software, and it's asking me for "W2" and "1099". Is the software wrong? 

Thanks


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## Bevdeforges (Nov 16, 2007)

In most tax software there should be some way to fill out a FEC (Foreign Employment Compensation) in the program. This is actually just a worksheet if you do your returns on paper, but in the tax programs, you normally have to specify that you have income from a foreign employer in order to call up the proper form.

For the foreign interest, there's no particular form - though what you can do is to list the sources on the top part of a Schedule B (which you should be filing if only to indicate whether or not you have foreign bank accounts subject to FBAR reporting). You only have to itemize your interest income if it exceeds $1500, so if it doesn't, you can just enter the amount directly on the line for interest income. However, since you need the Schedule B anyhow, might as well use it for something useful. <g>


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## christiana.prinn (Nov 12, 2017)

*Thanks, but does IRS require W2 ?*



Bevdeforges said:


> In most tax software there should be some way to fill out a FEC (Foreign Employment Compensation) in the program. This is actually just a worksheet if you do your returns on paper, but in the tax programs, you normally have to specify that you have income from a foreign employer in order to call up the proper form.
> <g>


Thanks for this! But would you please happen to know if an expat in my position usually needs W2? By IRS rules, regardless of software.

Thanks again!


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## Bevdeforges (Nov 16, 2007)

christiana.prinn said:


> Thanks for this! But would you please happen to know if an expat in my position usually needs W2? By IRS rules, regardless of software.
> 
> Thanks again!


No. A W2 is a document that is supposed to be prepared by a US registered employer. (I.e. an employer with a US Employer Identification Number)

Foreign employers do not issue W-2s. And foreign financial institutions do not issue 1099s. If the foreign financial institution is aware that you are a "US person" they may include your accounts in the FATCA information that goes to the IRS, but you will not receive any information about what they have or haven't sent.


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## shony (Jun 13, 2019)

Any employer will issue some statement that looks like W2. I am Russian. Employers here issue 2NDFL. I use it the same way like W2 to enter the amount earned from foreign employer.


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## Bevdeforges (Nov 16, 2007)

shony said:


> Any employer will issue some statement that looks like W2. I am Russian. Employers here issue 2NDFL. I use it the same way like W2 to enter the amount earned from foreign employer.


Be careful with that, though. What is issued by your country of residence may or may not correspond to what you are "supposed" to report on your US taxes. 

The US does not recognize "taxable income" as determined in many countries. What you are "supposed" to report is your gross income before any deductions.


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## shony (Jun 13, 2019)

That is what I was saying. Statement from employer always showes Gross income and income tax withheld. You can trust me on this - I am an accontant in US and used to be in Russia.


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## Bevdeforges (Nov 16, 2007)

shony said:


> That is what I was saying. Statement from employer always showes Gross income and income tax withheld. You can trust me on this - I am an accontant in US and used to be in Russia.


I'm an accountant, too. And (for example) in France, the only document you get is your last pay slip which gives you YTD figures. But until this year, France didn't withhold income taxes. "Taxable income" on a French payslip is gross less most (but not all) of certain social insurances.

And it's worse in, say, the UK, where the tax year runs April 5 to April 4 - so you have to accumulate the monthly payslips to get a calendar year figure for US tax returns.


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## shony (Jun 13, 2019)

Bevdeforges said:


> I'm an accountant, too. And (for example) in France, the only document you get is your last pay slip which gives you YTD figures. But until this year, France didn't withhold income taxes. "Taxable income" on a French payslip is gross less most (but not all) of certain social insurances.
> 
> And it's worse in, say, the UK, where the tax year runs April 5 to April 4 - so you have to accumulate the monthly payslips to get a calendar year figure for US tax returns.


Unbelievable. Very strange for me. 
Thanks.


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## Moulard (Feb 3, 2017)

In Oz the tax year is 1 July - 31 June, so I have never been able to use the Group Certificate (W2 equivalent). What with exchange rate differences, and the fact that my income varies week by week I can't even easily do a 50-50 split each tax year.

Instead I use the payslips provided fortnightly to calculate calendar year gross income. As it happens I also use the spot rate to convert based on the paydate on each slip.


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## shony (Jun 13, 2019)

Moulard, 
I know about AU year. That inconvinience is understandable. But what Bev is saying it is just impossible. I have never experienced anything like that.


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## Bevdeforges (Nov 16, 2007)

Obviously, it depends on the country and its tax system. But the point is that, while you normally send in a copy of your W-2 with your US tax returns, if you are living and working abroad, you don't send in anything to "verify" your earned income. (It has long been said that much of the US tax system works on the "honor system.")

In France, you can get your year end gross income figure from the YTD numbers on your last payslip for the year. However, the employer then submits all the income data from their payroll (earnings, withholdings, etc.) to the tax office - and you receive your tax forms partially filled in - with all the information that the government has on you. You can adjust the numbers from there if you have other sources of income or other amounts for deduction or credit. (With justification, of course.)

I really wish the IRS would do something like that. At least that way you have a list of what has been reported to them on your account and saves considerable hassle, wondering if you "should" be getting a 1099 for this or that account or transaction.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Obviously, it depends on the country and its tax system. But the point is that, while you normally send in a copy of your W-2 with your US tax returns, if you are living and working abroad, you don't send in anything to "verify" your earned income. (It has long been said that much of the US tax system works on the "honor system.")


The US tax system seems to be based on the principle that it’s an American citizen’s right to report (or misreport) his/her income and make creative use of deductions in order to minimise tax due.

Seems very inefficient from a revenue-collecting point of view. But presumably that’s not the point of view that holds sway.


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## Moulard (Feb 3, 2017)

> (It has long been said that much of the US tax system works on the "honor system.")


Setting aside the near unique stance of the US and citizenship based taxation, I think it would be difficult to argue against a statement that all countries work on an honour system for income sourced outside their national borders.

As an Australian tax resident, I am required to report my global income on my tax return. The ATO gets a copy of all my W-2 and 1099 equivalent forms. Its the income sourced from without Australian that they have to trust me on. 

The growing sense of distrust by all national taxing agencies is the root of the common reporting standard.


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## underation (Oct 25, 2018)

Moulard said:


> Setting aside the near unique stance of the US and citizenship based taxation, I think it would be difficult to argue against a statement that all countries work on an honour system for income sourced outside their national borders.


Yes. There’s no alternative for cross-border income, short of universal cross-border withholding. “Honour” has nothing to do with it.

The divide is over how to tax domestic income: collect most of it automatically via withholding, and concentrate enforcement efforts on the income which withholding doesn’t catch; or brandish sticks and carrots to encourage resident taxpayers to report income voluntarily.



> The growing sense of distrust by all national taxing agencies is the root of the common reporting standard.


It’s the (failing?) globalisation project that demands increased cross-border information exchange. Not trust, not honour, but financial muscle. The rich countries co-operate to force capital flight from the poor countries.


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## underation (Oct 25, 2018)

The UK has long had a problem with the Crown Dependencies and Overseas Territories. Residents of England, Scotland, N.I. and Wales could stash wealth in offshore accounts located in the CD&OT, and thus escape the UK PAYE withholding system.

When FATCA appeared, and Canada helpfully pointed out that it could be made to operate across borders, the UK at first refused, but soon began to see advantages. Not only did the UK join with the other G5 countries to negotiate with the US over the terms, but the UK also drew up its own version, known as “son of FATCA” or the CDOT regime. And refused to allow the Crown Dependencies and Overseas Territories to sign up to the US FATCA until they agreed to sign up to CDOT.

So the offshore banks started reporting mainland UK residents’ CDOT accounts and UK mainland customers found there was no longer much incentive to shift their capital investments from mainland Britain to the CD&OT for tax evasion purposes.


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