|
 Dear
Tax Talk,
My husband may be doing some consulting for a
business in India. If we understand the IRS, he
would be subject to federal income tax laws and
would file like always and pay taxes accordingly.
Am I correct? Thanks!
-- Rebecca
 Dear
Rebecca,
While most people can work with taxes all their
life and never understand the Internal Revenue
Service, you got this right. If you're a U.S.
citizen or resident for tax purposes, you have
to file and pay taxes in the U.S. on your worldwide
income.
You're a U.S. resident for tax purposes
if you have a green card or are present in the
U.S. for more than 183 days (even if illegally
for immigration purposes). Worldwide income means
income earned from anywhere, which would include
India. Tax credits for foreign taxes paid are
allowed against your U.S. taxes to prevent double
taxation. The credit only applies to taxes on
foreign source income.
Income earned from providing services
is sourced where the services are provided. If
your husband provides the services in India, the
consulting fees are foreign source income. If
he is subject to taxes in India on this income,
he can claim a credit against your U.S. taxes
(assuming his consulting business is filed on
Schedule C and you file a joint tax return). If
the services are provided in the U.S., there should
be no taxes due in India and you would not have
any credit against your U.S. taxes. Individuals
use Form
1116 to claim a credit for foreign income
taxes paid.
| 
