I earned in USA for 12 days (W2) then moved to foreign country rest of the year earning income from Foreign employer. But Turbo Tax treats all as foreign income. Why?

If you filing as a resident alien, Turbo Tax will tax your world wide income. From what you tell me though, if you were only physically present in the US for 12 days, you did not satisfy the substantial presense test which states you need to be in the US for 31 days in 2020.  If so, you can file a 1040NR with sprintax and just report your US income.

Hello and Thanks for your response Dave. 

 

Sorry, I forgot to mention I am a USA citizen. The information on the link you shared seems to be for International Tax payers which must be treated as a different category.  Isnt it. Also, the form 1040NR has a section right at the top specifying the From and To dates.  However Turbo Tax never asked me any questions such as From and To date I was in NJ. 

If you are a US citizen who worked in US for 12 days and physically worked overseas during the remainder of the year, you might qualify for a foreign earned income exclusion if you meet all requirements.  This is why the program takes you to the foreign earned income path.  Also, you would not file a Form 1040-NR which is for nonresidents. 

 

Without a tax document like a Form W-2, in TurboTax program, you would enter your foreign income as follows:

 

In TurboTax online,

• After sign into your account, select Pick up where you left off
• At the right upper corner, in the search box, type in foreign income and Enter 
• Select Jump to foreign income 
• Follow prompts

After you enter the information, if you qualify for a foreign earned income exclusion, the program will prompt you to continue to the Foreign Income Exclusion section.  It will generate a Form 2555.  To qualify, you have to live outside the United States for at least 330 days during 12 consecutive months.  For more information, please see Foreign income and exclusion and Extension. 

 

If you have paid taxes to both foreign country and the US tax authorities, the IRS allows you to claim a foreign tax credit on your US tax return.  To claim this foreign tax credit, you would need to file a Form 1116 Foreign Tax Credit. 

 

Here are the steps: 

• At the right upper corner, in the search box, type in "foreign tax credit" and Enter
• Select Jump to foreign tax credit
• Follow prompts

For example, if you made $110,000 overseas, you can use the Form 2555 to exclude up to $107,600, then apply the foreign tax credit on the difference (110,000-107,600).  Or you can use foreign tax credit on the whole amount, whichever benefits you the most.  However, you cannot use both benefits (double-dip) on the same amount.  

 

@ashwarun