Foreign Income

[Jesse]

This foreign Income is new for me so let me apologize in advance for being so naive. Client for several years emails me that she went to Mexico to teach for 1/2 the year.

She emailed me with a statement of income ($$ signs but it must be Pesos too - do you think?) and tax deductions and social security deduction in Pesos.

I'm trying to get a grip on where to begin and what all to even ask for besides #1. An extension!

Wouldn't they receive a regular W-2 or would it depend on whether they are paid by an American company or the Mexican school?

If she is the one teaching in Mexico would it be ignorant to ask her to break it down in dollars?

[Ken]

I would try to get a little more information from her regarding the withholding, but she is going to have to claim the income regardless.

[Burke]

If she is the one teaching in Mexico would it be ignorant to ask her to break it down in dollars?

Absolutely not ignorant. It has to be broken down into USD in order to do the return. But she probably can't do that. You can, by going on a couple of different websites and inputting the currency. It will calculate. You have to have the dates she was in the country for the 2555 and to do the exchange. I usually average the monthly rates into one rate and multiply by the foreign currency amt if it covers a long period of time. Then apply that factor to the income and the taxes paid. Hopefully she will meet the "days in the foreign country rule" to exclude. They probably do not receive a "regular W-2" if it is paid by a Mexican source. Just use what she has, and attach it to the return. Goes to Austin TX. And probably paper, no efile. Here is the one I use: www.x-rates.com. Might qualify for 1116. You may need the tax treaty with Mexico, if there is one.

[Jesse]

Thanks much for the link. I feel better now as it appears the Pesos to Dollars will only give her income of $4,000 +/- (better than the $50,000 emailed). Added to other income she may not have any taxable income at that.

It appears there is a treaty w/ Mexico for 1st/2nd year teachers so I'll have to see what taxes were taken out - possibly for Mexico.