TT 2023 not populating FEIE - Foreign Tax Credit Computation Worksheet

[Mike414]

I'm a US citizen living/working abroad. I'm reporting my foreign income and taxes, and under the Foreign Taxes section TT doesn't seem to work correctly. I completed entering all income and taxes paid data, and towards the questionnaire there's a page titled "Reduction in Foreign Taxes". The first 2 questions on this page don't populate any values for me, even though this should be carried over from form 2555 if I'm not mistaken:

- 2023 Foreign Earned Income Excluded Less Related Deductions: zero is shown, it should be 120,000 for me

- Total Foreign Earned Income Less Related Deductions: zero is shown, it should equal to my total income I entered already.

Is this a software bug, or did I enter something incorrectly somewhere that prevents TT to find the correct values?

I checked TT2022 and it seemed to correctly work there.

[tagteam]

Please check back here later. I will page Champ @pk.

[pk]

@Mike414 , let us start with the assumption that  TurboTax is misbehaving for some reason.  Please provide  more data for your situation:

(a)  Which is your tax home in ( most time spent in , if multiple countries) ?

(b) Date for your test period  ( continuous 12 month period where in you have been abroad for 330 days )?

(c) Where did you enter your foreign earned income --- Under personal incomes and "Foreign Earned Income Exclusion" ?

(d)  Am not sure why the foreign taxes paid had to be entered ( because if you choose FEIE  and unless  you  claim results in unexcluded income, there is no foreign taxes needed to be considered ) -- please tell me more on this.

(e)  Are you also claiming Foreign Tax credit on passive income and if so from which country ?

(f)  On form 2555 , what is the excluded  income on lines  33, 36, 42, 43, 45 and 50 ?   How about  Schedule 1 lines  8d and 24j ?

 Please answer  and I will circle back once I hear from you .

[Mike414]

Hi pk,

a) Tax home is a foreign country. I moved here 3 years ago, so not a new thing.

b) Test period is from jan1st to dec 31, I fully meet the physical test, I've been living in this country all year.

c) Foreign income: there was small portion for which I got a W2, but the majority was entered under the FEIE section

d) I need credit on foreign taxes as I earned more than the exclusion limit. I paid taxes on my entire income in the foreign country, and I need to pay taxes in the US for the portion that is above the exclusion limit, so I need the tax credit to avoid double taxation.

e) I have a very small credit coming from a K-3, some investment received foreign income on which they paid taxes. The country is not even specified as it's some sort of fund. It's not my home country, but some other countries. This is very small, like under $100.

f) line 33: 0

line 36: blank

line 42: 120,000

line 43: 120,000

line 45: 120,000

line 50: blank

Schedule 1 8d: -125,076 (120k is mine, the 5,076 is coming from my wife's exclusion)

24j: blank

I appreciate you looking into it. I read the instructions for Form 1116 Comp Wks, and essentially the problem is that TT doesn't fill in cell 12a1 and 12a2 on this form. Based on the instructions, the values for these cells are coming from Form 2555, and I do have the correct values there. Also, it seems like it worked in TT2022, I went back to the program and when I get to that page in the questionnaire, the values are showing up in TT2022.

[pk]

@Mike414 , thank you very much for your detailed response.  Nothing stands out from this .  So I will have to simulate  on my copy of Windows H&B and see why itis misbehaving.   It will take a bit of time -- so probably sometime tomorrow morning I should  be able to come back.    You did not provide the country --   Should I assume that it is a country which has a Tax Treaty with the USA in effect ?  How about Totalization agreement ? 

Did I understand that your spouse is also with you and has Foreign Earned Income Exclusion ?   If you have been abroad all year how did you end up with a W-2 ( as you seem to have ref'd ) --or is it  for your wife ( implying she does not meet the same  Physical Presence test period )?

So it looks ;like it is the 1116 that is having issues --- let me work on this .   And yes it should have followed from 2555.

Except for these  items, I think I have enough to simulate the situation.

pk

[Mike414]

@pkgood questions!

My current country is Hungary, and the US did cancel the tax treaty with Hungary, but it went into effect only from Jan 1st, 2024. So my 2023 taxes shouldn't be impacted. Also, since I'm a US citizen, I should still be able to claim the tax credit regardless of tax treaty, right? (i.e. from 2024 onwards).

My spouse's circumstances are the same as mine, US citizen living abroad. (We are Hungarian citizens too, but that shouldn't impact the tax filing)

The reason I have a W2 is that I received stock awards while I was working in the US, and they vest over 5 years. My employer sends me W2 for the portion of vested stocks that I earned while I worked in the US.

[pk]

@Mike414 , As I am working through your situation, a question coming up is  what is your world income --- what I see is if your  unexcluded income is less than the standard deduction then form 1116 may not work.    Could you give me that data point, please.

Also I  am in the process of confirming  whether form 1116 has sufficient knowledge to recognize  "general" category ( and therefore pull in  your unexcluded income for  FTC  or does it get confused and wait for the user to enter the amount  ( and then how does it verify that the entry is correct ).  This is especially important if you have two 1116 --one covering general category and one  using passive or Resourced by treaty.

I look forward to hearing from you 

pk

[Mike414]

Hi  @pk ,  my unexcluded income is well over the standard deduction. Our total income is ~240k. Since FEIE cannot be combined, we have 120k FEIE for myself and ~5k for my wife, so we still have ~ 115k to pay taxes on.

[pk]

@Mike414 , I ran with 155K for you and 10K for your wife -- yes then the form 1116 works.  However, it appears to  not suck data from form 2555 directly --- I had to enter both the total foreign taxes ( stand-in  of 30K ) and  the Foreign Gross income before  exclusion.  Then everything worked.  Thus I think your case will work if you go through the screens assuming that  Turbo is not automatically transferring from 2555 ( which both your  Gross Foreign as also the exclusion amounts but not the taxes paid.    I share  your  critic that once it knows that you want to use  foreign tax credit on the unexcluded income, it should have been able to prepare the form ( except for any HTKO transfers ) pretty much by itself --- I suppose it is a case of doing minimal changes  to achieve the requirements of this case (  FTC for unexcluded  foreign  income ) to general case .

Is there more I can do for you ?

[Mike414]

Thanks for your diligence investigating this issue, @pk !

I can do the same and transfer the missing data from Form 2555 manually. I just wanted to make sure there wasn't another problem behind it all.

[pk]

@Mike414  it should work -- just make sure that you enter the data into  the worksheet at the right spot   ( the   modifiable cells are a different color ) and then check the form to make sure everything is copacetic.  I am sure if you walked very carefully through the  "step-by-step" mode you will find a spot to enter the  values -- I usually cycle between step-by-step and forms mode