How do governments assess and collect taxes on foreign income?

Governments assess and collect taxes on foreign income through a variety of methods. In the United States, the Internal Revenue Service (IRS) requires citizens to report income earned from sources outside the country. This includes wages, investments, and any other types of income. Depending on the tax laws in the foreign country, the amount of tax due may differ. In Washington, foreign income is reported on federal and state tax returns, and the taxpayer is responsible for determining the amount of taxes due. The IRS also requires taxpayers to include a Schedule A, which shows a breakdown of the income from foreign sources. In addition, the taxpayer must report foreign financial assets such as bank accounts, stocks, and bonds on an FBAR form. On the federal level, the taxpayer is required to pay any taxes due on foreign income. If the foreign country charges a higher tax rate than the United States, the taxpayer may be eligible for a foreign tax credit, which can be used to offset any taxes due. For businesses, the IRS requires them to report income earned from foreign sources on Form 5471. This form is also used to calculate the applicable taxes due on the foreign income. In addition to federal and state taxes, some cities in Washington may also charge taxes on foreign income. The taxpayer is responsible for determining the amount of taxes due to their local government.

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How do governments assess and collect taxes on foreign income?

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