US citizen living in the UK on a US pension. UK tax year ends in April. How do I claim credit for UK taxes accruing since April of last year for this year's US return?

[nannersone]

Note - I have made no actual payments in 2017 for the UK 2017/18 tax year. They will be paid after April 2018. IRS is taxing the same income as the HMRC for April - Dec 2017, at present. I moved to the UK in April 2017.

[KarenJ · Accepted solution]

You should consider using the accrued method instead of the paid method for foreign tax credits.  Once you choose the accrued method, you will have to use the accrued method for all future years.  You cannot switch back to the paid method.  Just make sure you check the accrued method when completing your information in TurboTax.

You will be able to claim your UK tax liability from January - December 2017 on your 2017 US tax return instead of the foreign taxes you paid in 2017.

Please see additional information in the IRS publication for US citizens working abroad in the following link.

Tax Guide for US Citizens Abroad

[nannersone]

Sorry, where in Turbo Tax do I enter this?

[nannersone]

Also, the Tax Guide states the credit would be applied to foreign income. My sole income is from the USA, but is being taxed in the UK per the tax treaty. Supposedly there is a way to "resource" the income to be considered as UK income and, thus, eligible for the credit. How do I do that in turbotax? It would be with the 8833 form, which TT doesn't handle, correct? I'd have to print out the return, manually add the form, and mail it in?

[nannersone]

Tax guide 514 states:  If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. You are using an accrual method of accounting if you report income when you earn it, rather than when you receive it, and you deduct your expenses when you incur them, rather than when you pay them.  [i]In most cases, foreign taxes accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. Generally, this occurs on the last day of the tax year for which your foreign return is filed.[/i] So, does that mean I CANNOT claim credit for April - Dec 2017 on the in-prep return?