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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1084
Experience:  US Taxation specialist.
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how to report my foreing income from my business overseas ,

Customer Question

i am US citisen having a SCorporation,i want creat busness overseas, what is the best way? have a branche to company or report the foreing income from overseas to my personal income in usa. what is the IRS forms that i should use in two cases to report my income

Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

As you may qualify for the Foreign Earned income Exclusion, you will complete Form 2555. REFER TO LINK BELOW TO REVIEW FORM:

http://www.irs.gov/pub/irs-pdf/f2555.pdf

For more information on the foreign Earned Income Exclusion, refer to the following;

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.

A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or

A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months

http://www.irs.gov/businesses/small/international/article/0,,id=96817,00.html

If you do not qualify for the exclusion, you will report the foreign income as you report your regular income. You add this income to any other income that you may have.

Customer: replied 2 years ago.
it is not clear , i asked for a forms to report and i will be owner of my busniss overseas...i will not work overseas no i want have busniss overseas, what i want know is how to report my foreing income here in usa?
Expert:  Tax.appeal.168 replied 2 years ago.
My apologies, the original question that I responded to was not the question that I am now seeing. As this is a bit out of my realm of expertise, I will release the question so that another expert may assist you.

Thank you.
Customer: replied 2 years ago.
Relist: Other.
There are no answer to my question.???
Expert:  USTaxAdvising replied 2 years ago.
What country do you intend to do business?
Customer: replied 2 years ago.
egypt
Expert:  USTaxAdvising replied 2 years ago.

I have some research to do to appropriatly answer your question. I will revert as soon as I can, should be within 24 hours.

Expert:  USTaxAdvising replied 2 years ago.

Hello, sorry for the delay and thanks for your patience.

 

There are numerous factors to consider here, of which I can only give you advice on the tax matters. You should consult an attorney regarding the legal matters (such as liability, who can sue you, etc.)

 

There are potentially three methods for you to do business in Egypt, each with their own respective advantages and disadvantages:

 

1. Business conducted through an Egyptian Corporation ("Egypt Co") owned by the U.S. S-Corporation: Income is not reported on the S-Corporations books. When the Egyptian corporation pays a dividend to US S-Corp this is when you recognize income. Dividends will be eligible for qualified dividend treatment if the S-Corp holds Egypt Co stock for greater than 60 days. (i.e. 15% tax rate). Egyptian taxes paid by Egypt Co remain in company and do not pass to S-Corp shareholders. Upon disposition of Egypt Co stock you may have a long term capital gain/loss which will be taxed at 15% rates.

 

2. Business conducted through an Egyptian disregarded entity owned by the U.S. S-Corporation: Income is reported on the S-Corporations books. (i.e. no dividends to S-Corporation). Egyptian taxes paid by Egypt Co will pass to S-Corp shareholders and shareholders will then be able to use these taxes to offset U.S. tax on Egypt Co income, via the foreign tax credit. There are no special forms to use other than Form 1116. The 1120S K1 will report the U.S. Shareholders share of income/expenses/taxes from the Egypt Co.

 

3. Business is conducted yourself in Egypt via sole proprietorship: If you intend to live in Egypt and can establish bona fide residence or physical presence you may be able to exclude up to 90K of income (180K if Married filing join) from said Egypt Co. Foreign taxes paid by Egypt Co will not be available for foreign tax credit on the income excluded. Income and deductions are reported on Schedule C of your Form 1040. This would be considered a sole proprietorship and thus no gain or loss on disposition of company.

 

I believe the best strategy would be #2. File Form 8832 to elect disregarded entity status on the Egypt Co. The S-Corp will also have an annuall requirement to file Form 8858 and may also have a Form TDF 90-22.1 (Report of Foreign bank accounts) filing requirement.

 

It may be wise to engage a CPA to really work out the details and make a plan for this business venture. It could save you thousands of dollars.

 

Hopefully this answers your questions.

 

 

 

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