Your travel calendar 🌎📅💼 is crucial for accurate tax preparation. It helps your tax professional in several ways:
✅ Determining Residency Status: Your travel records help establish your residency status, which affects your tax obligations and eligibility for deductions or credits. For U.S. citizens and resident aliens living abroad, or non-resident aliens in the U.S., the number of days spent inside and outside the U.S. is key.
✅ Foreign Earned Income Exclusion (FEIE): If you qualify for the FEIE, you can exclude a certain amount of foreign-earned income from U.S. taxes. This requires meeting the Bona Fide Residence Test or the Physical Presence Test—both needing detailed travel records to show time spent outside the U.S.
✅ Foreign Tax Credit (FTC) and Income Sourcing: If you paid income tax to a foreign country or U.S. territory, you may be able to take this credit. The FTC can make a significant impact on your U.S. taxes. Accurate tracking of where and when you earned income is essential to calculate this credit correctly, as it influences how income is sourced and taxed.
✅ State and Local Tax Implications: Different states have specific residency and income sourcing rules, particularly if you work in multiple states or relocate during the year. Your travel calendar helps determine your residency status and tax obligations.
✅ FATCA Compliance: The Foreign Account Tax Compliance Act (FATCA) requires U.S. taxpayers to report foreign financial assets if they exceed certain thresholds. The reporting threshold for every individual varies depending on your marital and residency status. Consequently, an accurate travel calendar helps determine whether you have a filing requirement.
✅ Tax Treaties and Avoiding Double Taxation: Your travel records can reveal if you can benefit from international tax treaties, potentially reducing your tax liabilities in the U.S. and abroad. Proper documentation may help avoid paying taxes twice on the same income.
✅ Compliance and Audit Readiness: Keeping a detailed travel calendar ensures compliance with IRS regulations. In the event of an audit, having a clear record of your travel supports claims like the FEIE or FTC, helping you avoid penalties and interest.
Make sure to maintain a comprehensive travel calendar throughout the year, and consult with your tax professional to optimize your tax return and stay compliant with all regulations.
