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Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

What a fiasco! TurboTax entered my foreign tax withholding 1040 on line 16 (Federal Income tax withheld from forms W-2 and 1099). This withheld income is from from foreign earned income from a foreign company that has no relation to the US any any US company. It's PURE foreign income. Now check this out..

I got a letter from the IRS that wanted the following because TurboTax listed my Foreign Withholding on line 16. Here's a quote form the letter:

"To support the amount of withholding on lines 16, form 1040, submit:

  • Form W-2, Wage and Tax Statement (which I did, I translated my Japanese Wage and Tax Statement and converted the YEN to USD.)
  • Form 1042-S, Foreign Person's U.S. source Income Subject to withholding.
  • Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax
  • Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of the U.S. Real Property Interests.
  • any other U.S. withholding document.

ARE YOU KIDDING ME! I never have had to do this for all the 11 years filing with TurboTax. I always get my refund.

 I noticed that this year 2019, filing for tax year 2018 the IRS changed the 1040. The old, pre-tax year 2018, had a line 21, Other Income. List type and amount, where TurboTax correctly said: "Form 2555-Foreign Earned Inc along with the  ( - ) minus number (my foreign withholding). Now with the new tax form for 2018 tax year, there's no line for "Other Income"

My guess is, since there is NO place to list my Foreign Withholding EXCEPT ON LINE 16, thus triggering the above letter from the IRS. 

So, my question: Where should my Foreign Withholding be entered? If line 16, why do I get all those other forms from the IRS? 

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7 Replies
pk
Level 15
Level 15

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

Are you a US citizen/Resident (Green Card)?  Are you abroad ( foreign tax home)?  Do you have Foreign Earned Income eligible for exclusion?  Did you fill out a form 2555?  What country ( foreign tax home ) ?  Are you still there or have you been repatriated ?

Generally there is no place for foreign  taxes withheld -- there is one for foreign taxes paid ( 1099-B ).

So tell me more , yes ?

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

Thank you for reaching out.
Here's my reply that I posted in the "Community":


TurboTax always fills out form 2555, Foreign Earned Income, where on Part VIII (Taxpayers Claiming the Housing Exclusion, Foreign Earned Income Exclusion, or Both) Line 45, where my total foreign income is listed with the instructions that say: Enter the result here and in parenthesis on Schedule 1 (Form 1040), line 21. Next to the amount, enter "Form 2555". The amount was listed as a negative.
Next, On schedule1 form 1040, line 22, my negative gross earnings was instructed to be entered on form 1040 Line 6..
Next, after doing the Standard deductions line 8 my total tax came to 0.0 on line 15 (1040)
Then on line 16, Federal Income tax withheld from Forms W-2 and 1099, was the withholding amount of my foreign income. 
 
In regards to my requiring to report my foreign earned income, I've always filed ever since I moved overseas (I'm a US citizen). I've been using TurboTax for 11 years to help me file my foreign earned income (2555) along with the 1040. This is the first time to get a request for all the above mention forms in my first post. Doesn't make sense. Sounds like the IRS thinks I'm working for a US company or a Foreign Company that has some kind of US ties or connection. This is not the case. The company I work for is a small company that has no ties nor connections to anything US related.
 
I personally believe that the IRS person that reviewed my return made a mistake. Hey, we're human, it can happen. I'm hoping that this is this case. Even though the 2018 1040 is a new form the lines are still there though in different places. On all my previous tax forms there was line 64 on the "old 1040 - pre 2018" that said: "Federal Income tax withheld from Forms W-2 and 1099 which is EXACTLY THE SAME AS line 16 on the new 1040  2018 form.
 
Anyhow, I have a call scheduled with TurboTax, hopefully they can give me some advice. Thank you again for your reply.
pk
Level 15
Level 15

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

Since you are abroad and have been there for some time, why is there a w-2 and then withholding --- there should be none ( unless you had a US salary and employment , which does not seem is the case here  ).   Please could you keep me in the loop as you go through this ----  I am a retired tax professional and mostly do international  & foreign person's  tax related answers -- thus always interested when things do not seem right >

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

The W-2 is the Japanese Version of the US W-2. Which is the Statement of Earnings that includes the "gross earnings' and the 'withheld earnings" along with my name and address and company name.
I've been making a copy of my Japanese W-2, changing the YEN to USD and translating the address and company name. I've always done this for the last 11 years. I've never had any request for the above forms.

I called TurboTax about a month ago. The lady said there's a problem with line 16..When I mentioned I got a letter from the IRS, as stated in my first post, she directed me to contact "Audit Defense" ( I filed the 2018 TurboTax with "TurboTax Live Deluxe".

The good person at Audit Defense looked over my files and said that I need to contact IRS by phone. So I called IRS, the lady looked at my return and said the line 16 should be 0.0. So I then faxed my reply to the above contact that send the letter requesting all those forms. In my FAX I made a copy of my front page of the 1040, highlighted line 16 and said that it should be 0.0, that my Foreign Witholding, Japanese withholding) was mistakenly entered there.

I sent the FAX on 3rd May.

On the day i made posed this post, 17 May was when I took a good look at both my 2017 return, using the old 1040 and the 2018, using the new 1040 and noticed that the request from the 2017 1040 form, line 64 is the SAME as the 2018, line 16: "Federal Income tax withheld from Forms W-2 and 1099".

NOTE: I had no problems with 2017 and previous TurboTax filings from 2011 with filling in old 1040, line 64 with my Japanese Withholding. After all, it is my Japanese FEDERAL withholding. NOT my American witholding. I think someone at the IRS misinterpreted 'Federal" as being US. Not the case, according to the 10 years TurboTax has been filing for up until this new 2018 1040 form.

As I understand it, Foreign Earned Income is tax exempt up to $100,000.

This is very important:  Every year TurboTax has provided me with a refund equal to the Japanese withholding that I converted into USD.

Again, I appreciate your help. I'll do my best to keep you in the loop.

Summary:
US citiizen living as a Permanent Resident in Japan for the last 20 years. Has used TurboTax to file forms 2555 and 1040 for the last 11 years. Has always received a refund for the Japanese witholding that has been converted to USD for the last 10 years. This year is still pending because of above stated problem.
pk
Level 15
Level 15

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

What I get from your above note --(a) you did not enter your foreign earned income  under the  "other uncommon ---" category where foreign earned income and exclusion is generally entered. (b) you entered  your  taxes withheld  as if it was  US federal taxes  -- this is wrong. When excluding  foreign earned income, foreign taxes paid/withheld are never entered ( except  taxes on un-excluded  income  and then it is on form 1116). ; (c) foreign earned  income exclusion is based on  having a foreign tax home  ( physical presence test or bonafide resident with IRS approval ) and the excludable amount changes every  year  -- 2018 it was US$103,900 ( wages/self-employment income plus housing differential provided by employer ) .  From the above it seems to me that your filings have been in error and I do not understand how / why IRS has refunded you amounts that were actually not paid into the treasury.  I must be missing something here (?)

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

Wow! If your analysis is correct, that makes me wonder too. At this point I don't know what to say.

I always filed my 2555 using the 'bonefide resident" test. Thanks for your insight with this. I'm going to print out your comments and run them by with TurboTax this Friday when I have a call. I'll post here the follow up.

So as I understand it. I shouldn't be receiving any refund, and I did the right when faxing to the IRS to delete my foreign withholding from line 16 and make it 0.0 which will give me a 0.0 refund.

I'll also confirm with TurboTax on the call that I should also be filling out form 1116 in the future and if TurboTax Online will provide form 1116 next year.

Thanks so much for your insight and comments. Again. I'll post back here what TurboTax said. Hopefully it will be a "simple" confirmation of what you have already explained.
pk
Level 15
Level 15

Where do i enter my foreign withholding on the new 1040? TurboTax entered it on line 16 (Federal Income tax withheld from Forms W-2 and 1099). Is this correct?

Good Luck --- I await your update
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