Q&A: I’m a partner in two offshore companies — how do I file?
Q: Hello, I am a U.S. citizen living in Europe and I am a partner in 2 separate companies here, with 50% in one and between 30% and 50% in the other. I am very confused and have several questions.
- As I live full time abroad, I get a 2-month extension for filing until June 15th, correct?
- What forms do I need to include with my 1040? As I understand it, I need the 2555 and the 5471?
- As I am a partner and receive distribution of earnings rather than a salary, this does not qualify as foreign earned income so I cannot elect the foreign earned income exclusion, correct? So would I still need the 2555 form?
- Income taxes and SS are taken from my earnings here. Do I qualify for US tax credit?
A: I will answer your questions in the order you presented them.
- Yes, you an get automatic extension until June 15th.
- From what you have presented you will need at the very least Form 2555, Form 1116 and
- If you are receiving distributions — and NOT dividends — for work done then yes, it does qualify as Earned Income. Additional details about your situation would help us to provide a more specific answer.
- Income taxes and Social Security are two different issues. If you paid income tax you probably qualify for the Foreign Tax Credit (see number 1). Social Security is governed by whether or not there is a Totalization Agreement with the country in which you are residing. If there is, then, generally, you are only required to pay into one system. But you must pay into one or the other.