Originally Posted by biswaji
#1; I am a foreign national working in the US. I would like to invest some of my US earned income in a foreign national bank.
#2What procedure shall I follow so that when I bring my fund back in US, I am not charged income tax on my principal?
#3How does IRS know that the principal fund that I am returning from abroad is indeed earned in US?
#1; Are you a US resident for TAX PURPOSES UNDER THE IRS RULE???? OR Are you just a non -resident alien??? As long as you area US resident for tax purposes, then you are subject to US taxes on your US source and world wide income, unearned/earned income that you earn in US /overseas; as long as you are a non resident alien, then you do not need to repot the interest in a foreign bank. As a nonresident alien individual engaged or considered to be engaged in a trade or business in the US during the year. You must file even if your income did not come from a trade or business conducted in the US ;you have no income from U.S. sources, or your income is exempt from income tax. As a nonresident alien individual, you are not engaged in a trade or business in the US with U.S. income on which the tax liability was not satisfied by the withholding of tax at the source. However, if your only U.S. source income is wages in an amount less than the personal exemption amount , you are not required to file.
#2;No interest and principal in your foreign bank acct is taxable. Even Simple bank interest and interest on CD's in a US bank are not considered earned income for non-resident aliens, and therefore are not reportable. If you file taxes as a "resident alien for tax purposes, then, your bank interest is taxable income. However, whenever you transfer money exceeding $10K , your bank in US automatically reports the wire transfer to the Dept of treasury.
#3;As mentioned above,your bank in US reports money exceeding $10K to the Dept of Treasury whenever it is trasferred from US to abroad or vice versa.As long as yu report it on your US return, I mean, as after tax dollars, it is not subject to tax, double tax. As said above, interest income and principal transferred to you(as a non resident alien) in US from overseas is not taxable income.