topic HELP!! How to deduct foreign tax paid in Deductions & credits

HELP!! How to deduct foreign tax paid

GreenApple123 — Thu, 09 Feb 2023 01:14:42 GMT

Dear Sir/Madam,

I had a Vancouver gig in 2022. The pay was $6,000. My US agency withheld $675 tax (Canadian Tax Withheld). So my net pay was $5,325. I received a 1099-NEC with Box-1 listed as $6,000 just now.

How can I deduct the $675 that was withheld? On Schedule C, Line 23 "Enter taxes not from Form 1098 import"? Should I enter $675 as Expenses? It not, please advise/guide me which form to use and how to properly enter the $675?

Thank you so much!

Re: HELP!! How to deduct foreign tax paid

HopeS — Thu, 09 Feb 2023 14:35:39 GMT

No, you should not enter the foreign tax paid as an expense on Schedule C. You would use Form 1116 to claim the Foreign Tax Credit (FTC).

You can take the amount paid as a Credit or as an itemized deduction if you are filing Schedule A.

Both the credit and the deduction are entered in the same place. Here's what you do:

Open (continue) your return in TurboTax
Make sure you've already entered all your foreign income. If you still need to enter it, do that now
Select Search and search for the foreign tax credit. Select the Jump to link in the search results
When you reach the screen Do You Want the Deduction or the Credit? select the option you prefer for your situation

See the Link below for more detailed information and instructions:

Foreign Tax Credit

@GreenApple123

Re: HELP!! How to deduct foreign tax paid

GreenApple123 — Thu, 09 Feb 2023 15:07:38 GMT

HI Hope,

Thanks so much for your help.

Question is: I did not receive the foreign income directly. It was paid to my us agency and my agency sent me a check (in USD). I also received the 1099-NEC from my agency. If I use Form 1116, and enter my foreign income again, will I get double taxed?

Re: HELP!! How to deduct foreign tax paid

DaveF1006 — Thu, 09 Feb 2023 16:57:32 GMT

It depends. To clarify, was the tax withheld reported on the 1099 NEC in Box 4 since the US agency paid the tax?

@GreenApple123

Re: HELP!! How to deduct foreign tax paid

GreenApple123 — Thu, 09 Feb 2023 17:02:46 GMT

Hi Dave,

Thanks for your reply.

Box 4 of 1099-NEC is empty issued by my US agency. When they issued me the check in 2022, they issued me the check less $675 indicating that's a Canadian Tax Withheld.

Re: HELP!! How to deduct foreign tax paid

AbrahamT — Thu, 09 Feb 2023 18:53:36 GMT

@ HopeS Here's what you do

Select Search and search for the foreign tax credit. Select the Jump to link in the search results

When you reach the screen Do You Want the Deduction or the Credit? select the option you prefer for your situation

In most cases, choosing the Foreign Tax Credit will reduce your U.S. tax liability the most. TurboTax will already figure out the best outcome for you.
Enter your foreign income here

Here's where I would enter the foreign taxes withheld

You don't have to put this information anywhere else.