Hello All,
I have a doubt on FEI exclusion pertaining to vested RSU India income for US tax filing. Kindly help to clarify this please. I had worked in US and relocated to India and continuing with the same company here.
a. W2 has reported vested RSU income of 75K = 25K US portion + 50K India portion. These were granted when I was working in US but vested in India. Depending on the number of days in US and India from the grant to vest, this income is distributed across two countries? income / pay slips.
b. India pay slips (also Form-16) reported total of 125K including 50K India portion of RSU income and 75K India salary/bonus.
c. Since India portion of RSU income 50K is double counted (both in W2 and India pay slips), same should be deducted from total income for US tax return. So total income becomes 150K = 75K (w2) + 125K (Form-16) ? 50K (double counted RSU income)
Now the question is how much FEI is available here?. Is it only India salary 75K because India RSU income of 50K is already deducted? Or entire 125K (actually 10800 max allowed FEI for year 2015)? I thought it should be 10800 because 50K reduction is to address double counting in W2 and 10800 is for FEI exclusion. But I heard that it should be 75K, as total income can not go below what is reported in W2 (75K) and also 50K already deducted first time. What is there in W2 is for reporting purpose, not necessarily tax liabilities, right? Depending on this, total taxable income is 49,200 (150K-10800) or 75K (150K-75K). Which one is correct ?
Please provide your inputs.
P.S: I have mixed up numbers including capital gains, dividends, standard deductions etc but used above/indicated numbers here to keep it simple.
Thank you.
Double counted RSU and FEI exclusion
Double counted RSU and FEI exclusion
RSU is deferred (and earned) income. It is actually "earned" after the restrictions are cleared. And when it is earned, where it is earned would be relevant.
It qualifies for the foreign earned income exclusion.
Tax prep professionals would bill you for an opinion on whether a vested RSU (granted while in country-A, vested while in country-B) could be part of the 100800 FEI-exclusion.
It qualifies for the foreign earned income exclusion.
Tax prep professionals would bill you for an opinion on whether a vested RSU (granted while in country-A, vested while in country-B) could be part of the 100800 FEI-exclusion.
Double counted RSU and FEI exclusion
Thanks Okonomi for your quick response. My RSU income is mixed that is some were granted & vested in India and rest were granted in US & vested in India. Since this amount is deducted from total income one time to address double reporting, can it be included in FEI ? My paid tax person is of the opinion that FEI should exclude RSU income because it is already deducted from the total income. Hence want to hear other views as well. Thanks again.
okonomi;628665RSU is deferred (and earned) income. It is actually "earned" after the restrictions are cleared. And when it is earned, where it is earned would be relevant.
It qualifies for the foreign earned income exclusion.
Tax prep professionals would bill you for an opinion on whether a vested RSU (granted while in country-A, vested while in country-B) could be part of the 100800 FEI-exclusion.
Double counted RSU and FEI exclusion
Kumar;628666Thanks Okonomi for your quick response. My RSU income is mixed that is some were granted & vested in India and rest were granted in US & vested in India. Since this amount is deducted from total income one time to address double reporting, can it be included in FEI ? My paid tax person is of the opinion that FEI should exclude RSU income because it is already deducted from the total income. Hence want to hear other views as well. Thanks again.
Income happens when RSU gets vested. That income appears on W-2 and on form-16. For a hypothetical example, if RSU that is worth $1K appears on W-2 (and on form 16), it simply DOES as a matter of fact.
Your reference to "this amount is deducted" is mysterious to me. However, you can be as mysterious as you please on an internet forum.
A clear table of what you earned, where you earned it, which taxing jurisdiction taxed you on what, and by how much is the best thing you can provide as a supporting note (or statement, or attestation or document) to your US tax-returns. And perhaps, the same would be helpful to your tax-return preparer in India as well.
What is "deducted" ? Who deducted it ? Did you get the remainder after whatever was deducted ?
Double counted RSU and FEI exclusion
Ok okonomi. Let me see if I can explain it better this time:-)
1. My W2 shows 75K. My employer keeps track of details for each vestings including how much income for India & US and corresponding taxes paid to respective countries. Please note that US tax is withheld for 25K (marked as tax liability amount) and another 50K is marked as tax reporting amount. This matches my own calculation based on number of days I spent in India and US form grant to vesting. So good here
2. India payslip/Form-16 shows 125K that includes salary 75K and India portion RSU 50K. India portion 50K RSU matches with #1 and India tax is withheld for this amount.
3. For US returns (that is being prepared for me), both 75K (w2) and 125K (Form-16) amounts are added. Then 50K is deducted from total income by my tax person because same amount is shown in both W2 and Form-16. This is what I meant by saying "this amount is deducted". Up to this point, it looks clear.
My confusion is really after this; that is how much FEI can be applied. Can it be 125K that includes India RSU income (that is 50K) & salary (or) only salary 75K? BTW, these are captured and documented in detail for supporting purpose.
Thank you.
1. My W2 shows 75K. My employer keeps track of details for each vestings including how much income for India & US and corresponding taxes paid to respective countries. Please note that US tax is withheld for 25K (marked as tax liability amount) and another 50K is marked as tax reporting amount. This matches my own calculation based on number of days I spent in India and US form grant to vesting. So good here
2. India payslip/Form-16 shows 125K that includes salary 75K and India portion RSU 50K. India portion 50K RSU matches with #1 and India tax is withheld for this amount.
3. For US returns (that is being prepared for me), both 75K (w2) and 125K (Form-16) amounts are added. Then 50K is deducted from total income by my tax person because same amount is shown in both W2 and Form-16. This is what I meant by saying "this amount is deducted". Up to this point, it looks clear.
My confusion is really after this; that is how much FEI can be applied. Can it be 125K that includes India RSU income (that is 50K) & salary (or) only salary 75K? BTW, these are captured and documented in detail for supporting purpose.
Thank you.
okonomi;628668Income happens when RSU gets vested. That income appears on W-2 and on form-16. For a hypothetical example, if RSU that is worth $1K appears on W-2 (and on form 16), it simply DOES as a matter of fact.
Your reference to "this amount is deducted" is mysterious to me. However, you can be as mysterious as you please on an internet forum.
A clear table of what you earned, where you earned it, which taxing jurisdiction taxed you on what, and by how much is the best thing you can provide as a supporting note (or statement, or attestation or document) to your US tax-returns. And perhaps, the same would be helpful to your tax-return preparer in India as well.
What is "deducted" ? Who deducted it ? Did you get the remainder after whatever was deducted ?
Double counted RSU and FEI exclusion
[QUOTE].how much FEI can be applied Can it be 125K that includes India RSU income (that is 50K) & salary (or) only salary 75K? BTW, these are captured and documented in detail for supporting purpose.
If you are all set and eager to take the advice of some random okonomi ( okonomi (japanese) = whatever you like), here it is:
Your "earned" income is 75K + 50K. If you had not stuck it out with the same company which offered the RSU in the first place, you wouldn't have "earned it" after whatever number of years you toiled for that company for coolie wages. would you ?
Anyhow... that is my opinion. And that is the way I would fill in the form-2555.
If that does not work out with your paid tax preparer, then you'd have to pay taxes on that 50K in India, and claim that as foreign taxes paid CREDIT, using form 1116. This 50K would then be classified as "re-sourced due to treaty".
When all is said and done, one ought to make sure that one pays to the country that one loves more. Or may be to the country where the tax money is stolen/wasted less.
If you are all set and eager to take the advice of some random okonomi ( okonomi (japanese) = whatever you like), here it is:
Your "earned" income is 75K + 50K. If you had not stuck it out with the same company which offered the RSU in the first place, you wouldn't have "earned it" after whatever number of years you toiled for that company for coolie wages. would you ?
Anyhow... that is my opinion. And that is the way I would fill in the form-2555.
If that does not work out with your paid tax preparer, then you'd have to pay taxes on that 50K in India, and claim that as foreign taxes paid CREDIT, using form 1116. This 50K would then be classified as "re-sourced due to treaty".
When all is said and done, one ought to make sure that one pays to the country that one loves more. Or may be to the country where the tax money is stolen/wasted less.