HELP!! How to deduct foreign tax paid

[GreenApple123]

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!

[HopeS]

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:

1. Open (continue) your return in TurboTax
2. Make sure you've already entered all your foreign income. If you still need to enter it, do that now
3. Select Search and search for the foreign tax credit. Select the Jump to link in the search results
4. 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 

[GreenApple123]

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?

[DaveF1006]

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

@GreenApple123 

[GreenApple123]

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.

[AbrahamT]

        @ HopeS   Here's what you do

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

1. 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.