No. This is not the proper procedure to report this. You would need to claim a foreign tax credit for the amount of the foreign taxes paid. Here is how to enter.
- Go to Federal
- Deductions and credits
- Estimate and other taxes paid
- Foreign Tax Credit>start or revisit
- When it asks We just need to check if you have any uncommon situations indicate I paid foreign taxes on income I earned while working in another country.
- Navigate and record the entries that the program asks for and when you reach the page that mentions Foreign Tax Credit Worksheet, this is where you take notice.
- The first that you will be asked is what category of income is it, you will say Passive income.
- Next screen will say Country Summary, select add a country
- When it says Other Gross Income - XXXX, Here you put in the Gross Amount you earned in that country.
- Then you will navigate through the screens until you come to a screen that says Foreign Taxes Paid - XXXX, here is where you record the amount paid under Foreign Taxes. ($2.5K)
- Don't report this as a negative number.
- Finish out the section.
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