puravidapto
Level 7

The United States resident needs to report worldwide income from
United States and from foreign sources. The wage from United States
is reported in W-2, and we take the box 1 amount. The wage from
foreign countries are not reported in the format, can we take some
pretax deductions and derive the box 1 amount? Let us take a Chinese
paycheck stub as an example to make the question more clear.

Monthly salary: 24,000
Food allowance: 220
Retirement ("401K"): 2,000
Medical fund ("HSA"): 500
Provident housing fund: 3,000
Taxable income: 13,720

The taxable income per Chinese law is calculated as:

24,000 + 220 - 2,000 - 500 - 3,000 - 5,000 ("monthly standard deduction") = 13,720

When we report the foreign income in US tax return, do we report:

[a] Gross income: 24,200
[b] Taxable income per Chinese law: 13,720
[c] "Box 1 amount" computer per US law: 24,000 + 2,000 - 2,000 - 500
[d] Other

On one hand, the US law does not apply to China, and the pretax
items in China are not mapped exactly to the ones in the US. For
example, the 401K in the US is elective and in China is mandatory,
and there is no "High Deductible Health Plan". On one
hand, it would not be fair to report the gross income ("box 5
amount"). How to solve this dilemma?

Also the exchange rate used should be at the time of the income,
at the end of year, or at the reporting time?



--
Click this link to vote. Like many good things in life, we have to fight for them.
0 Cheers