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Reporting Overseas expenses

I own a FL Sub s but live full-time overseas, salary reported $1600/yr but company profit $45k+/yr.  I own a house/office and am building another one on the same land (paid cash).  I typically just pay IRS as if I live in FL (mother's residence).  Is there any advantage in reporting overseas expenses or just carryon as usual?

3 Replies

Reporting Overseas expenses

I have a big issue with you only reporting an annual wage of only $1600  when the company profits $45K ... I hope that is a typo.  

 

Next is the Office In Home deduction ... as an employee you cannot take the deduction any longer no matter where you live even if you otherwise qualify for the OIH deduction.    If you RENT space to the corporation  then you could get a deduction on the corp return however you would have to report the income for the self rental on the personal return ... basically just a wash which is really not worth the effort in most cases. 

Reporting Overseas expenses

I may not understand your question or the entire situation, but I have some thoughts.

As a US citizen, you are required to report and pay US tax on all your worldwide income, no matter where you are living at the time.  If you live overseas more than 330 days of the year, you can claim the foreign earned income exclusion, which excludes foreign earned income from taxation. However, because you have structured your company so that most of the profits come to you as unearned income, you would not qualify for this exclusion. 

The owner of a subchapter S corporation must pay themselves a fair market salary for their participation in the business, that is to say, a similar salary to what you would pay a stranger to do a similar level of work.  If most of your income is passive, and you don’t participate very much, then it might be OK to take a salary that is less than 5% of the profit, but I think that would be unusual and I suspect your fair market salary should be much higher.

 

Your business is allowed to report ordinary and necessary expenses, regardless of where they are incurred. If you operate the business overseas and have expenses overseas, they are deductible against your business income.  There is no reason not to take the deduction.  

As stated, by @Critter-3 , as a W-2 employee, you are not allowed to deduct home office expenses.  Your company can reimburse you tax free for legitimate expenses if you use an accountable reimbursement plan, but you would have to have very good records to show the reimbursable cost of the home office.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
pk
Level 14
Level 14

Reporting Overseas expenses

@Parallaxtek , having carefully gone through your post and your interactions with my colleagues @Opus 17 , @Critter-3 , I am not very sure I understand the situation --e.g. what is your immigration status;  which country are you a citizen of ( if not USA );  where are you "living all year ",;  what business are you in that gives you a payment/ profit of 45K a year and a salary of $1600 per year  ( seems rather incongruent -- IRS has rules on salary from S-Corps ); How did you pay cash for new additions to your office -- source of monies ------ granted this is only a tax  help ( i.e. how to use TurboTax to  prepare and file your taxes  ) but  is too much unknown  in this case --- please elaborate 

 

pk

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