Filing in USD when paid in GBP question

[dmclean222]

Hi, 

I know I have to file my taxes in USD but I'm paid in GBP for the most part. 

So, I'm wondering how I go about converting the currency? Do I use the exact date I was paid? In which case I would use historic transaction rates? 

Help appreciated. 

[FangxiaL]

You use the Treasury reporting exchange rate on 12/31/2021. 

[dmclean222]

Hi again, 

Thanks for that, however I am submitting self-employed taxes for the first quarter of 2022. 

Please advise. 

[ThomasM125]

I believe you mean you are paying in estimated taxes associated with your self-employment income for the first quarter of 2022. If so, use the current exchange rate as an estimate, as you will end up using the rate at the end of the year to report your income when you do your tax return.

[dmclean222]

Hello, 

Thank you, does that mean using the following: 

0.74	12/31/2021

If so, can you provide an example using the above figure...

In addition, at which point do I file it in dollars? It's paid into a UK account, I then have the option of converting it to USD at any point? 

Thank you 

[JulieS]

You aren't required to convert your earnings to USD at any particular point, but you are required to pay your US taxes in USD. 

You are also required to report your income in USD on your US tax return, but that doesn't mean you have to exchange your currency from  GBP to USD. 

For example, if you earned 1000 GBP during the quarter and you want to pay 20% in estimated tax for that quarter:

1000 GBP / .74 = $1351.35

200 GBP / .74 = $270.27 tax payment for the quarter

You would need to pay this amount in USD, but your don't have to convert the rest of your earnings, unless you want to. 

Also if you keep your books in GBP, you can just convert the amounts to USD when you file your tax return, using the average yearly rate.

You can use the annual average currency exchange rate, so that you don't need to keep checking the daily rates. Click here to see the published rates. 

[dmclean222]

Thank you very much, really helpful!