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Re: Foreign Tax Assessment

Initiate

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Trying to report worldwide income for compulsory Hecs-Help repayment and want to use overseas method.

First Question: I used simple assessment method last year, covering income earned thru Australian tax year 2016-2017. My foreign tax year is Jan-Dec, would I be able to use foreign tax year 2017, since it overlaps with income I used for the simple assessment method last year? The guidelines only say the foreign tax year cannot be re-used.

 

Second Question: Assuming I am able to use the foreign tax year, I am in the USA and there is no post-submittal letter from the IRS stating taxable income and tax result as there is in AUS. You submit your 1040 and then get an email from your tax people saying it was accepted and your refund goes into your bank account. If there is no letter, does that mean USA does NOT give a foreign tax assessment?

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ATO Certified Response

Former Community Support

Replies 5

Hi @Paskumji,

 

Thanks again for your patience!

 

Yes, the US doesn't ordinarily issue a notice of assessment after a return is processed. It's accepted that you can use your submitted US tax return amounts.  The US ‘taxable income’ amount is the number used when applying the ‘Overseas Assessed Method’. On a form 1040 you will have inserted this figure at row question 43 on page 2 of the 2017 return.


If you do not have a copy of your return, or the amounts used in submitting your return, you can obtain a transcript in order to obtain the taxable income figure that you had submitted.


The IRS website provides information on how to obtain a transcript of your lodged tax return as well as several different types of transcripts – here is a link to the relevant site.

 

Hope this helps, JodieH.

9 REPLIES 9

Former Community Support

Replies 8

Hi @Paskumji

 

Thanks for getting in touch!

 

Yes, in your case, providing you meet the requirements set out below, you can use  the ‘overseas assessed’ method to report your income for Australian tax purposes for the 2017/18 year. You can use the US tax assessment for the 2017 calendar year in calculating your Australian tax liability. As set out at Overseas HECS/Help Repayments, this approach will meet the relevant requirements where:

  • you received a tax assessment from a foreign tax authority
  • you received a tax assessment that covered a 12-month period
  • the period of the assessment overlapped the relevant Australian income year (1 July 2017–30 June 2018)
  • you did not receive multiple assessments for the income year from tax authorities of different foreign countries
  • you have not previously used that income assessment to calculate your foreign income

The requirement about receiving a tax assessment means that tax has to have been assessed and  an amount of yearly income for you determined by the US. You may need to contact your tax representative to ascertain the relevant details. Ordinarily, a US tax assessment will cover a 12 month period. In your case, the 2017 US calendar tax year for the assessment overlaps with the Australian 2018 tax year. You have not previously used the assessment for the US 2017 tax year as you did not use the ‘overseas assessed’ method for the Australian 2016/17 year. 

 

Thanks, JodieH. 

Initiate

Replies 7

Hi Jodie H,
Thanks for answering my first question.
As for my second question, I still don't know what documents to use. It still sounds like the USA doesn't give tax assessments according to your definition of tax and income being determined by the US. As I said, here your tax return is filled out by you, where you calculate your own deductions, credits, tax owed, etc. using a computer program or paperwork and a calculator.
To do this, you also use your W2 forms which you receive from your employer/s accounting department, it's essentially the same as a PAYG summary in Aus.
So thus far it's basically the same as Australia. Only difference is as I said, if your return is approved you only receive a third party email saying it was accepted. I did not receive any communication from the irs with any summary or results of my return. The only paperwork I can get from the irs is a tax return transcript which is just an irs version of my submitted return and I don't think it contains any irs-calculated data.
Is my submitted return enough, since I can show it was accepted?

Newbie

Replies 0

Agreed, experiencing a similar issue in the UK. A response would be appreciated.

Most helpful response

ATO Certified Response

Former Community Support

Replies 5

Hi @Paskumji,

 

Thanks again for your patience!

 

Yes, the US doesn't ordinarily issue a notice of assessment after a return is processed. It's accepted that you can use your submitted US tax return amounts.  The US ‘taxable income’ amount is the number used when applying the ‘Overseas Assessed Method’. On a form 1040 you will have inserted this figure at row question 43 on page 2 of the 2017 return.


If you do not have a copy of your return, or the amounts used in submitting your return, you can obtain a transcript in order to obtain the taxable income figure that you had submitted.


The IRS website provides information on how to obtain a transcript of your lodged tax return as well as several different types of transcripts – here is a link to the relevant site.

 

Hope this helps, JodieH.

Initiate

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Thanks very much for your quick, comprehensive and extremely helpful reply. Smiley Happy

Newbie

Replies 1

Hi, what about for the UK? I've rellocated to London indefinitely. I'm trying to work out my Hecs overseas repayment obligations/worldwide income. I'm considering using the overseas assessed method, but I note the guidance says you cannot use this method if you did not receive a tax assessment in the foreign country. As far as I'm aware, the HMRC in the UK does not issue anything of this nature for regular employment income in which tax has been withheld. You simply get a P60 form from your employer, which is much like a PAYG payment summary in Aus. You do not hear further from HMRC. With this in mind, can you go ahead and use the overseas assessed method? It would seem odd not to be able to use this method given the large Aussie expat community in the UK, but if you take the wording at it's literal context, it would seem you are prevented. Help would be appreciated.

Former Community Support

Replies 0

Hi @AustoLondon,

 

Thanks for getting in touch!

 

To be able to use the overseas assessed method to report your foreign income, you need to be able to provide all of the relevant information. You can use your P60 if it provides all the information required to work out your HECS account. If your P60 doesn't have all of the required information, you may need to use a different method or contact the HMRC directly to obtain the required information.

 

Thanks, JodieH.

 

I'm new

Replies 1

Dear ATO,

 

In regard to your response dated 17/09/2018 you state that "The US ‘taxable income’ amount is the number used when applying the ‘Overseas Assessed Method’. On a US form 1040 you will have inserted this figure at row question 43 on page 2 of the 2017 return."

 

The taxable income figure at box 43 includes a "Standard Deduction" of US$12,000 in FY 2018 (similar to the AUS tax free threshold), box 8 on a joint tax return.  As this deduction is not "incurred" so not a true deduction of the tax payer would you still agree that box 43 single person / box 10 joint tax return (split for individual tax payers) is the correct figure to use when adopting the Overseas Assessed Method.

 

There is no definition of taxable income per the guidance but the legislation directs you to use the definition of taxable income at ITAA97 - SECT 4.15 and then deductions is also defined as having the meaning in SECT 8-1 and 8-5.

 

My reading of this legislation would be that the Standard Deduction $12,000 allowed by the IRS should not be deducted when calculating the Foreign Income as the deduction was not incurred.


@JodieH wrote:

Hi @Paskumji,

 

Thanks again for your patience!

 

Yes, the US doesn't ordinarily issue a notice of assessment after a return is processed. It's accepted that you can use your submitted US tax return amounts.  The US ‘taxable income’ amount is the number used when applying the ‘Overseas Assessed Method’. On a form 1040 you will have inserted this figure at row question 43 on page 2 of the 2017 return.


If you do not have a copy of your return, or the amounts used in submitting your return, you can obtain a transcript in order to obtain the taxable income figure that you had submitted.


The IRS website provides information on how to obtain a transcript of your lodged tax return as well as several different types of transcripts – here is a link to the relevant site.

 

Hope this helps, JodieH.



@JodieH wrote:

Hi @Paskumji,

 

Thanks again for your patience!

 

Yes, the US doesn't ordinarily issue a notice of assessment after a return is processed. It's accepted that you can use your submitted US tax return amounts.  The US ‘taxable income’ amount is the number used when applying the ‘Overseas Assessed Method’. On a form 1040 you will have inserted this figure at row question 43 on page 2 of the 2017 return.


If you do not have a copy of your return, or the amounts used in submitting your return, you can obtain a transcript in order to obtain the taxable income figure that you had submitted.


The IRS website provides information on how to obtain a transcript of your lodged tax return as well as several different types of transcripts – here is a link to the relevant site.

 

Hope this helps, JodieH.


ATO Community Support

Replies 0

Hi @CHHade

 

If its the amount that an individual pays tax then yes that will be their taxable income.

 

Ari