Yes, if you are a US citizen or resident alien, you must
report worldwide income (in USD) on your US income tax return. This means that you will need to report your UK internship income on your US income tax return.
You will need to
report your foreign source income (in USD) from the time you started your
foreign employment until 12/31/2017. So if your foreign wages are reported on a fiscal
year basis, then you will need to determine what portion of that wages was
earned during the 2017 calendar year.
The Internal Revenue Service has no official
exchange rate. The IRS will normally accept any posted exchange rate
that is used consistently. You can translate the foreign currency to U.S.
dollars using the yearly average currency exchange rate for the tax year.
In general, use the exchange rate prevailing (i.e., the spot rate) when you
receive, pay or accrue the item. Please refer to the following IRS links for
more information about Foreign
Currency and Currency Exchange Rates and Yearly
Average Currency Exchange Rates
If you paid foreign taxes on
your foreign income then you will be allowed an offset for these foreign taxes
on your US tax return. If
you take a foreign tax credit, your US tax liability will be reduced by the
amount of taxes that you would have paid if the transaction took place in the
US (see this link Claim
Foreign Tax Credit). If you take a foreign tax deduction on Schedule A, you
will be allowed to deduct the full amount of the foreign taxes paid but you
will need to itemize (which could limit your ability to take the full
deduction). The TurboTax software will help you determine which of these
options will lower your overall tax liability.
To enter your foreign earned income in TurboTax,
log into your tax return (for TurboTax Online sign-in, click Here)and type "foreign earned
income" in the search bar then select "jump to foreign earned
income". TurboTax will guide you on entering this information.
