How to report foreign tax paid for tax year ending in February?

[michael-min]

I did not meet substantial presence test in 2017 so I did not have to pay for income earned outside of US that year.

During Feb. 2018, I received bonus from my former company in their local currency. Given that country has tax year March ~ February, I paid salary tax on that country which include bonus received in 2018.

Here's my question. If I want to claim foreign tax credit, how should I report tax amount for bonus portion? Tax from 2017 salary was negligible after deduction & tax credit, and majority of tax paid was attributed by bonus received in 2018.

Thank you in advance for your answer.

[KarenJ]

Are you still working overseas?  I believe you are saying that you received a bonus in Feb 2018.  Did you use the foreign tax credit (including tax on your bonus) on your 2017 return?  If so,  do you have a foreign tax credit carryforward?

[michael-min]

No, I was in US for whole of 2018. Tax return for 2017 only included wages for last 3 month (I did not meet substantial presence test in 2017) so didn’t use foreign tax credit that year.

[KarenJ · Accepted solution]

If you have a statement from your foreign employer detailing the portion of the foreign tax that was allocated to the bonus, use that amount as foreign tax credit.  If you paid the tax in 2017, then you need to claim the accrued method for foreign tax on your 2018 return.  If you paid the foreign tax in 2018, then use the paid method of foreign tax credit.

If you do not have a statement which details the tax on the bonus, you might try allocating the total foreign tax by the bonus divided by the total income (salary + bonus).  Please let me know if I have not answered your question.

[michael-min]

Thank you!