How to properly enter Foreign Earned Income and Foreign Salary Taxes Paid?

[LoganathanB]

You can review your tax return 1040 and schedule 1.

The foreign income exclusion will appear in line 8 d in Schedule !

If you qualify for and claim the foreign earned income exclusion, the foreign housing exclusion, or both,

the tax on your remaining non-excluded income will be calculated using the tax rates that would have applied had you not claimed the exclusion.

The reason for refund going down could be, you had more foreign income than that could be excluded and you will paying higher taxes for the income over the exclusion.

For tax year 2021, the maximum foreign earned income exclusion is the lesser of the foreign income earned or $108,700 per qualifying person.

Here is how to preview your tax return
1.   Open or continue your return.
2.   Select Tax Tools in the left menu
3.   Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.

If you are using Desktop version

You can switch to forms mode and view your tax return.

[flyhigh72]

Thanks for your fast response.  I followed your advice and did a little digging and discovered after I entered the "Foreign Earned Income", the amount of "Premium Tax Credit" (Form 8962) got reduced because the "Annual Contribution Amt" got increased from 0 to almost $5000.  Be honestly I have not clue what these tax codes are for and not sure if I should just use TT's calculations as is.  Any advice is greatly appreciated.  Thanks.

[DaveF1006]

This is because you underestimated your income in the beginning of the year. Your subsidies and premium amounts were based off of the income estimations you projected. If you underestimated your income, you need to pay back those subsidies that were granted based on your projections.

 You probably did not factor the foreign income in when you made your income estimation.  

[lori94010]

I am in this area of needing help as well. I lived here while doing Self-Employed work for and paid by a foreign company. I made under the $108,xxx. I was not sent any type of 1099 form. Where should I enter in this income? Thanks!

[ErnieS0]

Enter your income as self-employment income, the same as US self-employment income.

Here's how to do it:

1. Type self-employment income in Search in the top right
2. Select Jump to self-employment income

The foreign earned income exclusion is only available to US citizens or resident aliens who work overseas for 330 days within a 12 month period or are residents of another country.

You will also pay US self-employment tax unless you are not a US citizen or resident alien. Any alien who wishes to claim an exemption from U.S. Social Security taxes and Medicare taxes because of a Totalization Agreement must secure a Certificate of Coverage from the social security agency of his home country and present such Certificate of Coverage to his employer in the United States.

[lori94010]

Thanks Ernie. So I do have to pay taxes on the money. It seems weird since the money was paid by a foreign country. It looks like I can only use the "General Income" area because when I look at the "Foreign Income" area, it talks about work done while living in another country. 

So this income is treated 100% exactly like income that was paid to me by U.S. Companies?

[MarilynG1]

Yes, the IRS taxes you on all your income; whether earned in the US or a foreign country, if you live in the US. 

The only difference is that you can get a Foreign Tax Credit for tax paid to a foreign country on your income, so that you are not taxed twice on the same income (by the IRS and the foreign country).

Now those who live in a foreign country and earn foreign income (but are US citizens required to report their income to the IRS) may qualify for a Foreign Earned Income Exclusion (as they have to also maintain a home in the foreign country), that excludes part of their income from US taxes.

Click this link for more info on Foreign Earned Income.

[rajyel]

Thanks This helps. So trying to understand my situation. If  i have US income of $40K and i have $5k foreign income. I do pass the physical presence test as i came to US in May 2021 after more than 10 years outside and is  a US citizen. So how much should be the taxable amount (Before standard deduction ) for me ? I was thinking on the page for -xxxx Here is a picture of your 2021 Income should show 2 line items 1. With the $40K and 2. with negative minus 5K. And the total should add to $35K. Instead  the screen shows xxx, here is a picture of your 2021  shows 2 line items as 1. of  $45K and 2 minus $5 k. The total here is $40K . Is this correct ? (please note i am using desktop version ) 

[RobertB4444]

@rajyel  Yes.  The full $40K US earned is taxable and the $5K foreign earned income is not.  So your bottom line is correct.

[juinnder]

Hello, I don't qualify for form 2555 Foreign Income Exclusion since I wasn't out of the US long enough so I need to go with the Foreign Tax Credit. What form and where in Turbotax Desktop do I enter my wages earned and bank interest? Thanks for help with this!

[juinnder]

Yes, you can use Deluxe for this. Forms 2555, 1116 and 8938 if applicable.

[dasimeonov]

I am not eligible for exclusion. using tax credit. My question is not about federal tax. It is how turbo tax deluxe  will  decided to pay my SE (social security ) tax and can i file SE tax directly from TurboTax

[dasimeonov]

The country i am working in (Bulgaria)  does not have totalization agreement and my understanding is i have to pay SE (social security) tax in USA. This is what i do not know how to do in Turbotax deluxe