I am an employee of a US
company currently assigned to a project in Russia. I have spent the entire tax
year in Russia, other than that I am a regular US tax payer (my wages are on W-2
, taxes are withheld according to W-4
I need to file my tax returns
in both Russia and the US. My employer and I agreed to this process:
1. I file tax returns in Russia on my own.
2. I then pass information about my Russian tax liability
to a third party tax preparer
in the US.
3. Third party files my US tax returns taking into account my Russian tax liability
4. Third party supplies my employer with information necessary to calculate hypothetical tax.
5. I receive a US tax refund based on hypothetical tax.
This maybe irrelevant, but due to some delays and negotiations I am really behind on my taxes and currently preparing 2010 in both countries.
The difficulty I am facing is that my Russian tax is rather high in 2010 (say, 15000USD) and ideally I would like to finance it from my US tax refund. However, I do not know whether it would be legal to supply my US tax preparer with Russian tax information and obtain US tax refund before paying Russian taxes. The situation is further aggravated by the fact that under Russian laws
there are huge penalties if one files taxes late before he pays. The rule is that if you're late, pay first and file later. So ideally the sequence would be (1) get US tax refund (2) use that money to pay Russian tax authorities (3) file taxes in Russia.
1. Would that be legal to file US taxes and get the US tax refund based on the foreign
country tax liability before filing
taxes in that country?
2. Does IRS
require any proof that taxes in a foreign country were actually filed with a local
tax authority and it is not just a form
that has been filled out?
3. Do I have to disclose to my third party tax service provider in the US that I have not filed in Russia yet when I give them Russian tax forms as an indication of my foreign tax liabiltiy?
4. Foreign Tax Credit
IRS publication mentions that it should be calculated based on a foreign tax "paid or accrued", what is legal definition of "accrued"? Would it qualify as "accrued" before it's paid and even filed?
5. It also says that a "tax must be imposed on me" Would it qualify as imposed before it's paid and even filed?
Please support your answer with IRS docs, case precedents, documented common practices, etc. There are plenty of sites with unsubstantiated answers (e.g. "foreign taxes must be paid before filing") most of them are inaccurate or contradict IRS.