Reporting Foreign Earned Income by claiming FTC only instead of FEIE

Forum|Forum|2 years ago
March 24, 2024
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Hi everyone,

I'm a US citizen living and working in Japan. I have salary income earned in Japan in 2023. I'm filing my US taxes and noticed TurboTax automatically generated Form 2555 (Foreign Earned Income Exclusion).

However, I'm interested in claiming the Foreign Tax Credit (FTC, Form1116) only instead of the Foreign Earned Income Exclusion (FEIE, Form2555).

Here's my question:

Can I simply delete Form 2555 in TurboTax if I want to claim the FTC?
Or is there a specific way to indicate I'm choosing the FTC within TurboTax?

I've paid Japanese income taxes on my salary.

Any insights or guidance would be greatly appreciated!

Thanks!

Best answer by ThomasM125

Yes, you can delete Form 2555 if you don't want to use your foreign earned income exclusion, provided you had not chosen that election in a prior year. If you took the foreign earned income exclusion previously, you must revoke that election before you can forgo it in favor of taking the foreign tax credit in the current year. You can see IRS Pub 54 for how to do this.

Your foreign income will then be taxable on your US return, but you may be entitled to a foreign tax credit to the extent of your US income tax on your foreign income. Any unused foreign tax credit can be carried back one year or forward up to ten years.

You can read more here: Choosing the FEI exclusion or FTC

Here is how to delete Form 2555 in TurboTax:

1. Choose the Tax Tools option on your left menu bar

2. Choose Tools

3. Choose the Delete a form option under Other Helpful links

4. Find Form 2555 in the list of form and delete it

ThomasM125Answer

You can read more here: Choosing the FEI exclusion or FTC

Here is how to delete Form 2555 in TurboTax:

1. Choose the Tax Tools option on your left menu bar

2. Choose Tools

3. Choose the Delete a form option under Other Helpful links

4. Find Form 2555 in the list of form and delete it

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GoJYAuthor

Thank you @ThomasM125 for responding to the questions and explaining carry back/forward and the step of deletion. This is my first time reporting foreign income.

After deleting the forms (2555-T and 2555 p3-T), I noticed that in the Turbotax "Review", smart check step, there's a message prompting me to check the date within the form which no longer exists. It doesn't seem like a blocker because I can continue (skip it) and proceed. Is it okay if I just skip this step and move on?

Thanks again for all your help!

ThomasM125

It is possible the Form 2555 did not get deleted. You can try to delete it again to see if it is still showing in your forms. If so, you need to go in to where it is entered, in the Wages and Income section, then Less Common Income, then Foreign Earned Income and Exclusion and update that section. You will come to a screen that says Would You Like to Try and Exclude Your Foreign Earned Income? On that screen you need to indicate No, I know I don't qualify to exclude my foreign income to have the form deleted.