I've paid foreign taxes on RSU income already includes in my W2. How do i claim a foreign tax credit for this.

[taxnewbie5]

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

[KarenJ]

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.

[TomYoung]

@TurboTaxKarenJ

Do you have a cite for that percentage allocation treatment?  I'd like to read it.

Thanks.

[KarenJ]

Hi Tom... closing shop for the day.. will look for it.

[KarenJ]

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

[liviu]

Edit: I found the answer later in the thread. Thanks

[maheshr3]

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

[MarilynG1]

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.

[maheshr3]

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

[balrajvishnu]

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

[bsingh101]

Is excluding the RSU income (which is paid to other country) by adding -ve value in misc income is correct way. Has anyone did this?

[ISG1984]

Hi, I am in a similar situation - 

A portion of my vested RSU have been withheld (and sold to pay outstanding taxes). The RSUs were granted to me while in India. So, a portion of taxes are towards Federal US and India (together 100%) with additional taxes towards State (California).

Since I will be filing as US resident, I am confused how India portion of the income (RSU income) and taxes to be included in Form 1040. (confused since 100% of RSU income has already  been included in W2) @KarenJ @MarilynG1 

Do I need to add India RSU income (which is a subset of W2 reported income) in 1040  ? and pay taxes additionally ?

Any help here would be appreciated. @KarenR  @TurboTaxKarenJ

@DavidD66 

[vivi2020]

I have foreign incomes that include RSU (reported in my W2 too) and non-RSU. So in your message you mentioned that we should not claim foreign earned income exclusion for RSU, only foreign tax credit. That is fine and makes sense. But how to claim for other foreign earned income exclusion (other than RSU). Turbotax doesn't allow to separate foreign income to RSU and non-RSU, then claim exclusion for non-RSU foreign income.

[mbadaroglu]

Hi Karen, Thank you for your answer. Do you still need to enter the foreign source RSU income as foreign source income after you remove it from W-2 with the negative amount in the less common income? If you do not do this entry in the foreign income, then the foreign tax credit does not have a corresponding gross income to offset out. Can you check this?

[DaveF1006]

Yes.  When you complete the Foreign Tax Credit (FTC) section, there will be a page that asks for Other Gross income. Record the amount of the RSU that was taxed here and the the foreign tax credit will be based from this entry. This entry will not be entered as income in your tax return but is used strictly for the computation of your foreign tax credit.

I have included a screenshot in the FTC section where you will make this entry. The country shown and the amounts are hypothetical examples for illustrative purposes only.