Question

Income Re-Sourced by Treaty: Is Form 8833 Required?

Forum|Forum|3 years ago
February 26, 2023
1 reply
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I will file Form 1116 for Income Re-sourced by Treaty Category. I am a greencard-holder living in another country. My U.S. source income (e.g., interest and dividends) is taxed there, and I plan to take foreign tax credit against my U.S. income tax.

Is Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), required? Form 1116 instructions are not clear. It says "you may be required." https://www.irs.gov/pub/irs-pdf/i1116.pdf

Additionally, is my understanding correct that TT doesn't support Form 8833?

T

ThomasM125

You would only need to file Form 8833 if you were using a treaty to get special treatment of income. For instance, if you were trying to exclude foreign income from tax due to a treaty then you need to file form 8833 to apply for that exclusion. It is not clear from your question if you are trying to do something like that. The foreign tax credit applies to income taxed by a foreign country. It seems like that is what you have, so I'm not sure why you need a treaty to take the credit. TurboTax does not support that form . You can learn more about the foreign tax credit here: Foreign tax credit

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I

InugasukiAuthor

Thank you!

I am reducing my U.S. tax liability by claiming the FTC. The treaty allows me to re-source my U.S. source income as foreign source income; without this re-sourcing under the treaty I cannot claim any FTC since claiming FTC requires foreign source income.

I understand Form 8833 is not supported by TT. Would TT warn me if one is required?

R

RalphH1

Although the TurboTax program does provide “heads up” info on some unsupported forms (and even some “On-Demand Guidance” info about treaties), it cannot tell you about an 8833 requirement. Treaties are just a different animal than the basic reporting forms (with each being different, although common themes do run through them), and sorting out the possible tax positions for the form would not be practical for most users.

Resourcing income from your resident country to your non-resident country is unusual (as the TurboTax program will tell you on the “Income Category Type” screen). If you're sure about what you're doing with that, I’m in complete agreement with Thomas above, who noted that you don’t need to file the 8833 just to take a credit on tax paid to another country. But I also agree with his statement regarding more clarity being needed about all of this, and a lot of that clarity will come from the treaty itself.

@Inugasuki, our employee experts have to be a little restrained when straying out into unsupported and messy areas like tax treaties. But (unless you’re already sure about everything except the 8833 question) if you let us know what country it is (and other relevant specifics), hopefully someone can provide info which will help!

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