I do not see how foreign source income included in a W-2 is not taxable. I do not think it should be subtracted on Line 21. Edited to insert "not"
Further, if it is not taxable in the US, then you cannot claim a foreign tax credit because it has not been taxed by the US and another country.
Then how should we handle it? But I think you are right, either it is used as itemized deduction from taxable income or we claim foreign tax credit, It cant be both.
If this situation applies to you. Enter your W-2 information and then go to Foreign Earned Income Exclusion and indicate that you received foreign income on a W-2. TurboTax will ask you how much of your W-2 was foreign. Indicate the foreign amount and continue. You do not want to claim the foreign earned income exclusion, only foreign tax credit.
So reporting foreign earned income as you mentioned here is not same way as mentioned in main answer(from miscellaneous income section) ?
Because mine is for exact same reason, that is RSU vesting.
And in forign tax credit section, what income category does RSU vesting income qualify for? 'General Income'?
This year they are asking what part of the W-2 is foreign so you do not need to subtract it one place and reenter it another place. RSU would be general limitation income.
Hi, I am confused by the same scenario. I was granted RSU's which have been vesting over 4 years and during that time I have worked for the company in Australia, NYC and now Los Angeles. I paid tax in Australia for the Australian taxed portion of the RSUs vesting in 2018 and that was communicated via an Australian Tax document but my USA W2 also lists that Australian portion of the RSUs as income.
I originally followed the method you noted in the response 1 year ago and I could understand that but following this new method suggested above has confused me.
In your note above "If this situation..." I go to the "Foreign Earned Income Exclusion.." section and you mentioned I need to "indicate that you received foreign income on a W-2" which I select which then directs me to "go back and enter that income in the wages & income section" where my USA W2 is already listed. I wondered if I needed to enter my australian tax information as a new W2 but Australia doesn't issue W2's and that didn't make sense. Can you provide a bit more information regarding how and where this needs to be entered please.
Exactly this one is much more confusing? but by the way when you filed last year, did that work ok?
I still did not file, because I am still not clear about process.
When filing W2 if I indicate that income in this W2 is foreign then it allows me to put exact negative number to offset, that works fine at first. But it only gives option of exclusion of that amount if I select no for exclusion then i cant really go forward.
Did you claim foreign tax credits last year? Did you enter than in general category?
Last year (2017) I had a tax agent do my tax but figured I would try myself this year with turbo tax and yes, the tax agent just listed my Foreign tax on a form 1116 and listed it under "general category income".
Were you able to file this year? I also have the same scenario and am quite confused. Thanks.
I was able to but after further reviewing my W2 I realized this year it didn't include the portion allocated outside of the US, only those allocated to US so my tax ended up being a whole not easier after re-calculating my W2 total.
You would need to know the amount of RSU included in your W-2 wages. After determining this amount, you will need to allocate the income by between foreign and US workdays between grant and vest. If 50% of your workdays during this time were in a foreign country, then 50% of your RSU income would be foreign source. US source income cannot be offset by foreign tax credits.
You would enter you W-2 as you normally would in TurboTax. Then you would go to Miscellaneous income to enter the amount of foreign source RSU income as a negative number on line 21, page 1 of your 1040.
Please follow the instructions below to report your foreign RSU income as a negative on line 21:
The you need to go to the foreign tax credit section of TurboTax to enter the foreign income (amount that you entered as a negative on line 21) so that you may take credit for the foreign taxes you already paid.
To include the amount of foreign taxes you paid, follow these steps for TTPremier:
Thanks, for calculating the % of foreign income, do I need to get the percentage on the total W2 income(ie foreign vested rsu + us income) or just the foreign vested RSU income
No you would calculate foreign workdays on all your RSU income. If 240 workdays during the year and 120 of the workdays were foreign you would calculate 120/240 * RSU income = foreign income from RSU. If you were working overseas in 2017, then your base salary can be allocated by workdays as well (but only on 2017workdays) Bonus would usually be allocated using prior year workdays if some of it was earned overseas.
@TurboTaxKarenJ
Do you have a cite for that percentage allocation treatment? I'd like to read it.
Thanks.
Hi Tom... closing shop for the day.. will look for it.
Sourcing rules are contained largely in IRC 861-
863 and 865. The statutory rules cover interest, dividends, compensation for services,
rents and royalties, gains from sales of property and social security benefits
Hi There,
Need help on this.
When I got transferred from Singapore to US in 2018 June, as part of final settlement, I was taxed on all non vested RSU's left with me by Singapore govt. Those RSU's are getting vested from 2019 and I am taxed in US as well.
Q1: Can I claim the foreign tax credit for the tax I paid in Singapore 2018 as part of my 2019 filing this year?
Q2: If so, can I do it as a one time credit for the entire taxes i paid in Singapore for the portion of RSU's vested this year (I will have some vesting in next two years as well) or I need to claim only the tax relevant to the stocks vested and taxed so far in US?
Q3 : How do I apply for the tax credit in my filing (I am looking for the process, forms etc)
Thanks
Mahesh
Generally, you can't claim foreign tax you paid in 2018 on your 2019 return. You would need to go back and Amend your 2018 Return to claim the Foreign Tax Credit for tax you paid in 2018.
However, since you paid tax in 2018 for RSUs vesting in 2019, you can claim the entire amount of the Foreign Tax you paid in 2018 by indicating 'accrued' on the Foreign Tax Entry screen, as long as the tax credit is not greater than the income realized in 2019.
Or, as you mentioned, claim the Foreign Tax Credit in 2019 only for stock vested in 2019, etc.
Type 'foreign tax credit' in the Search window, and 'Jump to foreign tax credit' to get to the entry area.
Click the link for detailed IRS info on the Foreign Tax Credit.
Hi Marlyn,
Thanks for the response and options. I haven't added the foreign tax credit in 2018 returns due to two reasons(based on the tax consultant's input)
1. I have filed a dual status return as i was becoming a non resident to resident alien in 2018, since i moved on June 28th. This was useful to avoid paying tax in US for the global income for the full year.
2. The RSU's were not vested to my account in 2018.
So looks like i will have to go with the option 2 given by you to apply for tax credit for the vested RSU's in 2019?
Mahesh
Hi Karen, I am in the same situation and getting double taxed.
This is excellent and this is the answer i was looking for, In summary:
-> You are excluding the income for the which the foreign Govt has taxed for the RSU's from the W2 Declared income
-> You are also including the foreign taxes that was paid
Is this correct, Did you check this is what needs to be done?
Thx,
Vishnu