Question

Foreign shares as compensation and taxes paid to foreign country

Forum|Forum|6 years ago
April 5, 2020
1 reply
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Hi, I work for a US company whose global headquarter is in France. Part of compensation comes in the form of share grants each year. They take 4 years to vest after which they're mine to action. Using round numbers for simplicity, I owned $50K worth of shares in 2019, of which I "sold-to-cover" $20K worth of shares to address my tax liability to France and cashed out the remaining $30K which was directly deposited into my personal Citi checking account from BNP Paribas (bank where shares are managed).

After looking at my W2s, $50K is reported as part of my earnings. The $20K I paid to France is listed under Deductions as a miscellaneous deduction and therefore making the $30K as taxable income.

Is this correct that I'm taxed in both France and US for this kind of compensation or is there a way to get a credit for the $20K i paid to France?

RobertG

Yes, you can claim a Foreign Tax Credit.

To qualify you must be a U.S. citizen, U.S. resident alien, or a U.S. nonresident alien who is a full-year resident of Puerto Rico.

You must also have paid (or owe) taxes on foreign income that is also subject to U.S. income tax. The foreign tax must be:

An income tax (or a tax in lieu of an income tax)
A legal and actual foreign tax liability
Imposed on you

Here's how to enter it in TurboTax:

Make sure you've entered all your foreign income.
From within your return, search for foreign tax credit and select the Jump to link in the search results.
Answer Yes to Did you pay foreign taxes in 2019 or have credits to use from a prior year?
Follow the instructions to get the credit or deduction.

In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through this section.

If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit if your situation requires it.

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