One of the most common questions that clients have is ‘why do I owe US tax’? Here’s how we determine what you owe. First, we identify all of your sources of income, including types of income that are considered taxable in the US, even though they aren’t taxed in your home country (the most common example is annual investment income from non-US retirement plans). Next, we look to see if you have any deductions you can actually claim – but these are very limited because there are special rules for things like donations to foreign charities, etc. Often, we have to remove deductions you can claim on your home country tax returns. Then, we adjust the income and deductions to your home country’s tax year, if they tax you using a different period than the calendar year (and we prorate based on days). We then convert the amounts from the currency in your home country to US dollars, using the IRS average exchange rate. Finally, we apply any foreign tax credits for income taxes paid to your home government against your US tax liability. If the taxable income in the US is higher because more income is considered taxable, or if foreign taxes paid are less than what you would pay in the US on the same income, you will have to cover the difference with the IRS. Our advice: There are a lot of steps to computing US taxes you owe, and you can’t assume all steps are exactly the same as the country where you live.