Managing Director, American Tax Returns Ltd American Tax Returns Ltd
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IRS London oops and double oops moment!

24th Feb 2014
Managing Director, American Tax Returns Ltd American Tax Returns Ltd
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The US Embassy website in London is currently publicizing a series of “unofficial exchange rates” for 2013 and previous calendar years that are ENTIRELY different from those on the IRS official website.  Oops!

The ones they decide to list for previous years are also entirely different from the rates published on the same Embassy website during the whole of last year. Double oops!

The unofficial IRS average exchange rate can be found on the real IRS website right here:

http://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates.

Technical note

The rates currently published on the IRS London Embassy website, incorrectly use the “buy” or “ask” rates instead of the “bid” or “sell” rates, which more accurately reflect the rates that you or I would obtain if we were exchanging money. The London Embassy had the correct rates until a recent update; since when their website has been incorrect.

In truth, the IRS has no official exchange rate to be used on US income tax returns, and will accept any reasonable published exchange rate that is used consistently.

Many individuals use a yearly average exchange rate to report non-US income that is regularly received throughout any year. Since the IRS changed their view as to what a reasonable exchange rate should be back in 2011, the IRS official rates have not been based on Interbank rates but instead the rates that you or I could obtain if we transferred cash.

For those who need to file FBARs as these are not tax returns these specific forms require an official US Treasury spot exchange rate, listed on the US Treasury website.

The mistakes on the IRS London website (which as a consequence cannot be relied on) can be found here:

http://london.usembassy.gov/irs/irsxchng.html

http://photos.state.gov/libraries/unitedkingdom/164203/irs/Exchange_Rate_Handout_IRS_London.pdf

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