As a USA citizen with only USA sourced income (just interest reported on 1099’s re the USA and Canada interest reported on similar ax slips), my understanding is that the only way that you can reduce or eliminate your USA tax obligation is to re-source that interest income by completing form 1116 so that you can then get the foreign tax credit due and necessary to reduce or eliminate the USA tax liability on that very same interest income. The questions I had above were more focused on HOW this is properly recorded using the TurboTax software. To be specific, in my case, I have the 1099 interest forms from both Canada and the USA (my only sources of income). I am a USA citizen, but reside in Italy where I am also now a citizen. I will therefore owe tax in Italy on my worldwide income. As a USA citizen, I of course have a filing obligation, but to avoid being double taxed on that income, need to use FTC’s and the only way to do that is to re-source that USA and Canada sourced income to be Italy sourced on form 1116. The issue is that I do NOT have any foreign tax showing in box 6 on any of the tax slips, so am not sure how to reflect the tax that I WILL pay to Italy on that interest income. Do I plug a tax paid number into box 6 on each 1099 and say it was/will be paid to Italy? That would populate form 1116 with the foreign tax that will be paid to Italy and then also show the applicable FTC for the income that was re-sourced. Kindly advise step by step as I use TurboTax online and have for many years now but just moved to Italy in 2024.
…I should have clarified that the USA-Italy tax treaty allows for the re-sourcing of the USA and Canada sourced income to be considered Italy sourced interest income, thereby allowing the FTC to be calculated in removing the USA tax obligation on that same interest income. I am asking about the mechanics of getting all of that information input using the TurboTax online software program, as it is confusing. As I said, I can “force” the foreign tax by inputing a number in box 6 on each form 1099 entered in the income section, with that number being the 26% of the 1099 interest number that will be paid to Italy, but there isn’t a number in box 6 on any of the 1099’s as issued.
February 25, 2025
12:00 PM
