How do governments assess and collect taxes on foreign income?

Governments assess and collect taxes on foreign income using international tax laws. In Tennessee, the Internal Revenue Service (IRS) is responsible for enforcing U.S. tax laws on the federal level. The IRS requires taxpayers to report all foreign income, no matter where it is from. This includes income from salaries, business activities, and investments. Taxpayers must report their foreign income on their federal tax return, including any income earned outside Tennessee and the United States. Depending on the type of income, U.S. residents may also be required to make special payments, such as the foreign earned income exclusion or foreign tax credits. The IRS also requires companies and individuals that do business abroad to file returns and pay taxes. Businesses may be responsible for filing multiple forms depending on their activities. For example, Companies with international trading activities are required to file a Form 5472. Companies must also file a Form 8858, which will detail any foreign income and the taxes paid on it. In Tennessee, local taxes may also apply on foreign income. For example, if a resident earns income in a foreign country, they may owe local Tennessee state income tax on that income. The amount of state tax owed on foreign income depends on the specific circumstances. In summary, governments assess and collect taxes on foreign income using international tax laws. The IRS requires taxpayers to report any foreign income earned and it is up to the taxpayer to ensure they comply with all applicable tax laws. Additionally, local Tennessee taxes may apply on foreign income.

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How do governments assess and collect taxes on foreign income?

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