Contractor Paid in Dinars - Tax Question

[marsmars]

I have a question, I was a US contractor in Iraq, and I got paid in Iraqi Dinar ( you could be paid in USD or Iraqi Dinar or both) When I file my taxes I will include the value of my dinar in, and total income recieved.

I have already paid taxes on my money......so if my dinar goes up, should I have to pay taxes of it AGAIN :no: :no: ......The value of USD goes up or down all the time (inflation), I dont get taxed extra money when it goes down.....how can the IRS tax me a second time? Its NOT an investment.......its a paycheck.

Could you help on this issue,
Thank,
DF

[thmgroup]

A very interesting question indeed! If you paid US federal income tax on your pay as received, it would appear you have a very valid argument that no additional tax would be owed (other than any interest income accumulated if you kept part of that in a Dinar savings account). After all, had Uncle Sam kept it's share in dinar (say 15% of 100,000 ID or 15,000 ID), the government would ALSO benefit from what was withheld from your paycheck upon RV.

[Lux]

I just renamed this thread by it's topic.

I will PM MichelleIRS to respond. You can do the same anytime.

Friendly reminder - about Rule 13
Do not create entire new threads to invite specific user(s) to post - No need for threads such as "Yo Jack please answer" or "JohnDinar, what do you think?". This is why the PM system exists. If the user wants to post, they will.

[Michelleirs]

I have a question, I was a US contractor in Iraq, and I got paid in Iraqi Dinar ( you could be paid in USD or Iraqi Dinar or both) When I file my taxes I will include the value of my dinar in, and total income recieved.

I have already paid taxes on my money......so if my dinar goes up, should I have to pay taxes of it AGAIN :no: :no: ......The value of USD goes up or down all the time (inflation), I dont get taxed extra money when it goes down.....how can the IRS tax me a second time? Its NOT an investment.......its a paycheck.

Could you help on this issue,
Thank,
DF


I will do some research today while I am here at work and get back to you!

[Lux]

Thanks michelleirs!

You're a great "non-taxable" asset to our community. ;)

[Michelleirs]

I found 2 Publications that you should read. You can pull them up at irs.gov and go to the forms section or call 1-800-tax form and they will mail them to you. The first Pub is Pub 514 - it discusses the credit you may be able to take if you paid taxes to a foreign country on foreign source income and you are subject to U.S. tax on that same income. the second one is Pub 516 - it is for U.S. citizens working for the US Government who are stationed abroad. It explains the tax treatment of certain allowances and expenses they may receive. I would also recommend asking the payroll division of the company you work for. They should be able to guide you in the right direction also. I am still looking for more info but figured this should be able to get you started. If it were me, even though I work for the IRS, I would do research on my own and then hire an experienced CPA or tax-preparer to help me out.

[marsmars]

Thank you, I will look into it.:happy64:

[marsmars]

I looked into it and from what I can see, I paid taxes on it already do to my dinar being considered income.

The IRS cannot tax me twice.

I claim what the dinar is worth at the time and I pay taxes on its current worth. If it goes up from there...........sorry IRS, but I am NOT taxed on my silver dollars WHICH go up in value as silver increases.

:happy64: :happy64:

[CashMan]

marsmars I looked into it and from what I can see, I paid taxes on it already do to my dinar being considered income.

The IRS cannot tax me twice.

I claim what the dinar is worth at the time and I pay taxes on its current worth. If it goes up from there...........sorry IRS, but I am NOT taxed on my silver dollars WHICH go up in value as silver increases.



dream on marsmars. The IRS can basically do what they want. It's like when you buy your home. You are leasing it from the goverment. You don't own it. try not paying your property tax and see what happens.

[dougmyers]

I looked into it and from what I can see, I paid taxes on it already do to my dinar being considered income.

The IRS cannot tax me twice.

I claim what the dinar is worth at the time and I pay taxes on its current worth. If it goes up from there...........sorry IRS, but I am NOT taxed on my silver dollars WHICH go up in value as silver increases.

:happy64: :happy64:
==========================

If you paid taxes on your income and then buy stocks with your already taxed money, and the stocks increase in value and you sell them you owe tax on the gains from the sale, the difference between what you paid for it and what you sold it for.
This will most likely be the same.

Your silver Dollar idea is ok with one or two silver dollars but try it with millions and the tax man will come knocking!:crying:

[MEALTICKET]

==========================

If you paid taxes on your income and then buy stocks with your already taxed money, and the stocks increase in value and you sell them you owe tax on the gains from the sale, the difference between what you paid for it and what you sold it for.
This will most likely be the same.

Your silver Dollar idea is ok with one or two silver dollars but try it with millions and the tax man will come knocking!:crying:


That's about the size of it. Unless you funnel that NID to a foregin account.In a business name. I think most people are going to get hung just trying walk in banks to cash in! Beside who in their right mind would have thought about opening a account in Iraq during these times. I think that and a healthy investment in ISX is exactly what is going to seperate us from the rest!!!:rolleye03 :happy26: :shhh:

[OK_Tax_Lawyer]

I looked into it and from what I can see, I paid taxes on it already do to my dinar being considered income.

The IRS cannot tax me twice.

I claim what the dinar is worth at the time and I pay taxes on its current worth. If it goes up from there...........sorry IRS, but I am NOT taxed on my silver dollars WHICH go up in value as silver increases.

:happy64: :happy64:


Marsmars,

I check this Forum only on weekdays, so I did not respond to your post over the weekend, as many did. As a U.S. taxpayer, you must report all income in terms of U.S. Dollars, which is called your “functional currency.” IRS Regulation §1.985.

You are absolutely correct that you pay income tax on the earning of dinars (a non-functional currency for you), as the dinars had value when you received them.

The problem lies in what you do with the dinars in the future. If the hoped for reval takes place while you are holding dinars, then you will eventually have currency gain, which is taxed at ordinary rates under Internal Revenue Code Section 988. It is not that you are being taxed twice on the original income (original services performed in exchange for your original payment in dinars), but that the future speculation by holding the dinars is also a form of income to you when you convert them back to dollars.

One is active income on which social security, FICA, etc. is paid – the other is passive income like dividends on stock, against which only income tax is paid.

The IRS Regulations on this are pretty clear that you can make use of your dinars any way you wish and so long as they remain as dinars you will not get taxed (IRS Regulation §1.988-2(a)(1)(iii) and related provisions). Whenever you convert dinars to dollars, however, you convert from a non-functional currency to your functional currency and IRS Reg. §1.988-1 taxes you at that time. This is where I maintain that the ordinary rates will apply. Please note, however, other disagree with me on this point.

Shelter the dinars in a legitimate tax protected environment to avoid immediate recognition of income when you convert to dollars. See a qualified CPA/tax attorney to help you.

Hope this helps.

IRS CIRCULAR 230 DISCLOSURE: Pursuant to recently-enacted U.S. Treasury Department Regulations, attorneys are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments and/or enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

[marsmars]

Thats some GREAT info, thank you for investing you time to answer my question .

Sooooo;) can I bounce them into other currancies (other then USD) and take LONG vacations...lol

[OK_Tax_Lawyer]

Thats some GREAT info, thank you for investing you time to answer my question .

Sooooo;) can I bounce them into other currancies (other then USD) and take LONG vacations...lol

Marsmars,

Well … , I wouldn’t comment on the long vacation part, but why not create a new Roth 401(k) (just allowed by law as of 1-1-06) and borrow against the amount in the 401(k)? That way, the long vacation wouldn’t end up in an extended stay at the resort known as Club Fed! :)

Hope this helps.