Question

Foreign salary and tax credit question

Forum|Forum|5 years ago
February 20, 2021
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Hi, I have foreign salary income (no 1099 or w-2), but I am very confused on how to file the foreign salary and tax credit in the Turbotax Premier. Here is what I did:

1. enter the income amount in "Wage & Income", then "Foreign Earned Income", "A statement from foreign employer", and "neither" at the exclusion page to not claim the foreign income exclusion.
2. go to "Deduction and Credits", "Foreign Taxes", "Take a credit", "Simplified Method", "General Category Income", "Add a country", "Other Gross Income - for Country", enter the same income amount, and then "Foreign tax paid" enter the tax paid.

Is this the right way to do it? I found that my tax owed swings wildly when

a) do not enter a "Foreign Earned Income", just have the amount in Foreign tax credit's "Other Gross Income"

b) enter a different number on "Other Gross Income" to "Foreign Earned Income", or 0 for income but still enter the foreign tax,

c) try for exclusion and also enter the foreign tax.

Not sure which way is right. Thanks very much.

DaveF1006

It does sound like you entered your foreign income correctly. Here are some things to remember.

Be sure to indicate that you need to pay foreign taxes on your income. You can claim a foreign tax credit paid if that country and the US has a tax treaty in place.
Now enter the information about the foreign income exclusion, so you can properly exclude your foreign income, Once the program mentions you can exclude, then:
Work on your foreign tax credit by going through the menu path you previously described.
As you are answering questions, you will enter the amount of the foreign earned income again as wage income and the country where it was earned. The program doesn't populate the income amount where you excluded your foreign income.
This will generate a Form 1116 and the category of income is general category income. When it asks for a description, it will be wage income and then you will list the country.
The program suggests you make the simplified method unless you really confident if you can adjust your wages and deductions for AMT purposes, that is if you have an AMT situation in the first place.
I hope this helps

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