Is H1B visa holder taxed worldwide on their global income?

Thanks for the clear explanation! I'm also on H1B and have accounts back home. Quick question - how does the IRS even know about my foreign accounts if I don't report them? Not that I'm planning to hide anything, just curious about how the system works.

The IRS has several ways of finding out about foreign accounts. Many countries have tax information exchange agreements with the US, which means foreign banks report account information directly to the IRS. This system is called FATCA (Foreign Account Tax Compliance Act). Additionally, if you're audited, the IRS can request information about all your accounts. The penalties for not reporting foreign accounts can be severe - up to $10,000 per violation for non-willful failures and potentially much higher for willful violations. It's always best to be fully compliant from the start to avoid these issues.

Does this taxr.ai thing actually work for complicated situations? I have investments in my home country plus a property I'm renting out. Would it help with figuring out if I need to report the rental income too?

I'm skeptical... how does it know the specific tax treaties between US and different countries? Like my country has a special provision for certain types of savings accounts.

It absolutely works for complicated situations including foreign investments and rental properties. The tool specifically asks about foreign real estate and rental income to give you tailored advice. It breaks down what needs to be reported where on your US tax return and even explains the forms you'll need. Regarding tax treaties, that's actually one of its strengths. It has a comprehensive database of tax treaties between the US and other countries. You select your country and it incorporates the relevant treaty provisions into its guidance. I was impressed when it correctly identified the special provisions for pension accounts from my home country.

Wait how does this actually work? Does it just call the IRS for you? Couldn't I just do that myself?

Yeah right. The IRS never picks up. This sounds like a scam to get your money for something you could do yourself if you just keep trying.

It doesn't just call the IRS for you. What it does is navigate through the complex IRS phone system and waits on hold for you. When an agent is about to pick up, it calls your phone and connects you directly to the agent. So you don't have to waste hours listening to hold music. No, this is definitely not a scam. I was super skeptical too, which is why I mentioned that. But after trying to get through to the IRS for weeks without success (constant disconnects, hours on hold), I was desperate. It literally saved me days of frustration and I got my specific H1B tax questions answered by a real IRS agent. Sometimes your time is worth more than the money you save trying to do everything yourself.

That's a good point about tax treaties! How do you find out if there's a treaty and what's covered? Is there a simple way to check?

The IRS has a list of all tax treaties on their website. Just search for "IRS tax treaties" and you'll find it. Most treaties have special provisions for things like retirement accounts, certain types of interest or dividend income, and sometimes for students and researchers. The tricky part is understanding the treaty language, which can be very complex. I ended up talking to a tax advisor who specializes in expat taxes for my first filing. It cost me about $300 but was worth it to make sure everything was done right. After that first year, I understood what I needed to do and have been filing myself since then.

Thank you for pointing this out! I actually arrived in the US about 8 months ago, so I'm definitely going to hit that 183-day calculation. But you're right that it's not automatic just because someone has an H1B visa. Does this mean that in my first partial year in the US, I might have a split tax year - part as a nonresident alien and part as a resident alien? How would I handle reporting my worldwide income in that case?

Yes, you would have what's called a "dual-status" tax year. For the part of the year before you met the substantial presence test, you'd be a nonresident alien (only US-source income taxable). For the rest of the year, you'd be a resident alien (worldwide income taxable). You'd need to file a special dual-status return. Generally, you'll file Form 1040 for your resident period and attach Form 1040-NR as a statement for your nonresident period. There's a special process for this. In the year you become a resident alien, you'd report worldwide income only for the portion of the year you were a resident. This gets complicated fast, so many people in this situation use a tax professional for at least the first dual-status year.

This is such valuable advice! I wish I had known about tracking maximum balances from the start. I'm just starting my H1B journey and already have accounts in two different countries. Quick question - do you use any specific apps or tools to track the balances, or is a simple Excel spreadsheet sufficient? Also, how do you handle currency conversions for the reporting? Do you convert to USD at each month-end or just at year-end when filing?

Great question! I just use a simple Excel spreadsheet - nothing fancy needed. I have columns for date, account name, balance in local currency, exchange rate, and USD equivalent. For currency conversions, I use the Treasury's exchange rates (you can find historical rates on their website). The IRS actually specifies that you should use these rates for FBAR reporting. I convert monthly when I update my spreadsheet rather than waiting until year-end - it's much easier to find the exchange rate for a specific date when you're doing it in real-time rather than trying to remember what rate to use 8 months later! One tip: if your home country currency fluctuates a lot against the USD, your maximum balance in USD might occur on a different date than your maximum balance in local currency due to exchange rate changes. So definitely track both the local currency amounts AND the USD equivalents throughout the year.