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[aardvark]

So the US taxes get more and more complicated-- for people who don't even live in the US.  So what happens if I just mail all my relevant documents to the IRS and say "tell me what I owe-- I can't figure it out; I plan to pay it, but it's your responsibility to tell me what I owe because I only got a 790 on my math GRE and only a 730 on my analytical GRE, which means I can't figure this stuff out"?  Will they figure all my investment gains and losses, my form 1016 and 2551 (and my wife's), my foreign income exclusion and foreign tax credit, and tell me what I owe; or will they tell me I've committed a felony by claiming not to be able to figure all these things out?

And, more importantly, if not being able to figure this stuff out is a felony, will they come to China to arrest me?

[secretweapon]

I don't know.  I'm one of those pathetic adults who has never done my own tax returns (my dad, a former accountant, does them for me - he wants to keep his skills fresh.  Some day I will wrestle them out of his control and do them myself, because I really need to understand how it all works).  My income is so far below the foreign exclusion that I don't worry too much about it.

If you screw everything up, they probably won't come to China to arrest you, but they may give you a lot of hassle when you enter the US. 

[aardvark]

obviously I meant 1116, not 1016 :)

[aardvark]

Anyway, I'm actually considering sending in a tax return, with a check for about $5k, that says "Dear IRS, I can't figure this out, but here's some money; thanks."  I wonder what they'd do?

[qrypt]

Because the pound was strong against the dollar for most of last year, my income as stated in dollars looks pretty high -- high enough to worry about the AMT.  What a f***ing nightmare -- I've always done my own taxes, but trying to deal with the AMT and foreign income is leading me to see your proposal as attractive...

[qrypt]

Anyway, I'm actually considering sending in a tax return, with a check for about $5k, that says "Dear IRS, I can't figure this out, but here's some money; thanks."  I wonder what they'd do?

Actually, this is exactly what you can do.  In working on my own taxes, I came across the part in the instructions that say you can simply tell the IRS that you want them to figure out how much you owe.  You have to fill out the front of the 1040, basically telling them about your income -- and then on the back you can go through line 43 (subtracting deductions and exemptions).  But you don't have to figure out how much tax you owe. 

Since you're living/earning abroad, this might work only if you're also willing to complete Form 2555, so that you can exclude your foreign income (subtracting it on 1040 line 21, "other income").  But in doing this you might end up learning that you don't owe anything anyway, that you don't have any taxable income. 

By the way, if you have kids, then using the 2555 route might be unwise; possibly it's better to use foreign tax credits via 1116, so that you can claim "additional child tax credit" via form 8812.  If you have kids, perhaps complete 1040 to line 43 regarding your income *and* tell them about your foreign tax payments and your preference for taking those two credits. 

Anyway -- I'm not a tax advisor -- YMMV.  But the idea that you can ask them to figure out how much you owe is possibly the way to go; this is what it says on p. 36 of the 1040 instructions -- which suggests that you have a look at Pub. 967.

[observer3]

Just use TurboTax. You can do the form online for cheap. And no, they aren't paying me!

From what I understand, we get to use the exchange rates as of December 31 2008. Which makes those of us in the UK very lucky, in fact. If someone knows different, please speak up!

[qrypt]

Just use TurboTax. You can do the form online for cheap. And no, they aren't paying me!

From what I understand, we get to use the exchange rates as of December 31 2008. Which makes those of us in the UK very lucky, in fact. If someone knows different, please speak up!

No such luck -- you have to use the exchange rate that prevails on the date money is received.  See Pub 54 -- it's very clear on this.

[observer3]

Hmm... but the IRS itself links to Treasury rates that are assessed on Dec 31. Is there a more specific link they point one to? Or an average? I've not heard of a required pro-rate for monthly income before; rather as I understand it one should use a rate and be consistent. The publication is confusing because it seems to be aimed at businesses rather than someone working at a foreign insitution!

In looking at
http://www.irs.gov/publications/p54/ch01.html#en_US_publink100047340

For monthly income from a foreign entity it would seem that the functional income is not in dollars, regardless of one's citizenship; the top and bottom of the page contradict. As per the bottom...

"If your functional currency is not the U.S. dollar, make all income tax determinations in your functional currency. At the end of the year, translate the results, such as income or loss, into U.S. dollars to report on your income tax return."

Thoughts out there?

[qrypt]

I realize that passage you quote is tempting.  But here are some others:

Your functional currency generally is the U.S. dollar unless you are required to use the currency of a foreign country....  The U.S. dollar is the functional currency for all taxpayers except some qualified business units (QBUs).
...
If your functional currency is the U.S. dollar, you must immediately translate into dollars all items of income, expense, etc. (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Use the exchange rate prevailing when you receive, pay, or accrue the item.

I could well be wrong in my reading of all of this, but I think it means that unless you are a QBU you have to use the exchange rate prevailing on the day you get paid. 

By the way, if your income is constant across the year, then it will be possible simply to use the average exchange rate for the year, applied to your annual income; you only need to use separate rates if your income changes.

[observer3]

Where is the clearest place to find an average? The US embassy used to do this but it looks like this year they dropped the ball.

[qrypt]

Here's one for averages:  http://www.oanda.com/convert/fxaverage

And here's one for specific days:  http://www.xe.com/ict/

[aardvark]

Thanks, grypt.  And, sadly, I'm not a qualified business unit :(