I've filled the Turbo Tax forms to apply for Foreign Tax Credits. Last year, the account firm that helped me with my tax return (a one-time relocation benefit) added the wages from my W-2 and the foreign wages from me and my spouse's job of our previous job.
This time around, however, I see the tax credit being applied, but the foreign wages are not being added to the value of Line 1. Does it really matter?
It does. If you are taking a foreign tax credit for tax on foreign wages the wages should be showing on line 1.
You should verify that you have entered the income in Wages and Income. You can enter it using the W2 fields filling in as many boxes as you have information for. As you continue through the TurboTax interview, you will be able to indicate the income is from a foreign employer.
You may have entered the foreign wages and claimed a foreign earned income exclusion. You can only claim the foreign tax credit if the income is being taxed by both the US and the foreign country. If the income is being excluded under the foreign earned income exclusion, you are not able to claim the foreign tax credit for tax on the same income as it isn't being taxed in the US.
To check this, type foreign earned income in the search box in TurboTax and then click the Jump to link. You should not be excluding any income that you are claiming a foreign tax credit for on Form 1116.
Yes, you may claim foreign income or deduction as opposed to foreign income exclusion. If you paid taxes on your foreign investments, you may qualify for a foreign tax credit. The foreign tax credit is reported on 1099-Div statement, box 7 showing foreign taxes paid or 1099 Consolidated Brokerage Annual Statement.