Tax is mandatory and collected by local, state, and national governments from individuals or businesses to cover the costs of general government services. Not paying your taxes by not filing or figuring out what you owe can have huge repercussions. Snipes did not file a return between 1999 and 2004, or pay tax on the estimated $38 million he earned during that period. Tax became complicated since he was filming movies around the world and each government wanted to tax him. Ultimately he ended up spending some time in jail for failure to file and pay tax on income earned outside the US.
All income, earned inside and outside the country, of U.S. citizens is taxable under Sec 1, 61, 63 and others. Section 861, and accompanying regulation 26 C.F.R. § 1.861-8, list what income is earned “inside” the country, and that’s relevant only to non-residents and foreign corporations because they only pay tax on domestic income. The list is typically not important for U.S. citizens, because they are taxed on all income, whether it is earned domestically or foreign.
IRS regulations re-iterate this point, stating:
“In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States.”
Lucky the code has many generous credits for foreign income including taxes paid in foreign countries. This can bring your tax down to almost zero in some cases. Gooding CPA can help you navigate these complicated issues. Contact us today for help.