asked for AGI and have no idea!

[barthur]

I am at a point in trying to do my taxes, where I am being asked by Turbo Tax  to enter  "any adjustment to my gross income". I don't know if I should be entering something. I thought Turbo Tax would figure that out for me. I also don't know what "form" (such as Form 1040EZ) I am using because Turbo Tax has chosen one, I imagine, as I have been going through the process, but I don't know which it is. I know that if it is the 1040EZ that I would NOT  claim any adjustments to income. I suppose I am being asked about AGI because I filled in foreign taxes paid? But still, I have no idea what if anything I should fill in here... I had hoped Turbo Tax would do it for me. But I know that AGI is important and I don't want to just skip over this question. Anyone able to guide me here? 

[DoninGA]

The program is asking if you have any alternative minimum tax preferences or adjustments applicable for the income or expenses for Italy.  If you are not liable for AMT on your tax return then leave those blank.

Adjustments and tax preferences are items of income and deductions that have received favorable tax treatment for regular tax purposes but which are added back to or subtracted from your income for alternative minimum tax (AMT) purposes.

[barthur]

You've been so kind to help me, thank you! How do I know if I am liable for AMT ?

[barthur]

I honestly did not even know what it is. I am googling it and it seems to apply to top percentile of taxpayers which I am definitely not. I am very low income. So perhaps I can guess that I would not liable for it. 

[DoninGA]

The program would have taken you through the AMT section if you were liable for AMT.

Only about. 0.1% of taxpayers are liable for AMT and usually those in the upper income brackets.

[barthur]

But does it relate to foreign tax credit? I am totally new dealing with the foreign tax credit thing. I guess there is some connection between me paying foreign taxes, and possibly being liable for the alternative minimum tax?

[barthur]

OK, if  0.1% of taxpayers are liable for AMT and usually those in the upper income bracket, then it is highly unlikely that I am liable for it.

THANKS!!

[DoninGA]

You will need to review your tax return to see how the taxes owed are being calculated.

Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.

Also, you should have entered your foreign earned income before entering the foreign taxes paid.  

You won't be able to take a credit or deduction for taxes paid (or accrued) on excluded foreign earned income or housing. This is because excluded income and housing isn't taxed in the first place.

US unearned income, such as interest or dividends, are not excluded from being taxed in the US even if you have foreign earned income be excluded if the total of the unearned income is greater than your standard or itemized deduction.

[donrevelle]

Adjustments to AGI are amounts that are deductible, but that do not go on Schedule A, Itemized Deductions.  Adjustments to AGI would be things like contributions to an IRA, or teacher's expenses, or contributions to a health savings account, or alimony paid, etc.  If you don't have any amounts like that that are deductible, you can skip that section.

[barthur]

Hi,

Regarding what you said about:  "you should have entered your foreign earned income before entering the foreign taxes paid."

 I did not have any foreign earned income. I did not earn anything  in Italy in 2018. I was on a visa that did not allow me to work but I still had to pay Italian taxes (on my savings in the US) due to having residency in Italy. 

I am not well versed in these accounting terms, but I think what you saying here:

"US unearned income, such as interest or dividends, are not excluded from being taxed in the US even if you have foreign earned income be excluded..." is that I even if I did fill things in correctly regarding the taxes I had to pay in Italy, that it may be normal to also see that I owe some tax in the US even though I had thought that was not possible due to Italy’s double taxation agreement with the US and how it ensures that I will not be taxed twice on my income... is that what you are saying ?

[DoninGA]

If the federal taxes owed on your income in the US is greater than the taxes you paid in Italy then you will owe the difference. 

The foreign taxes paid should be on Schedule 3 Line 48.  The totals from Schedule 3 flow to the Form 1040 Line 12.  The taxes on Line 12 are subtracted from the taxes on Line 11 and entered on Line 13.  Total taxes are entered on Line 15.

After any tax payments if you owe federal income taxes that amount will be entered on Line 22 of Form 1040.

[barthur]

Thanks DoninGA,

I know I will sound really ignorant asking this but I am not clear where to view form 1040. I went to topic search under tools, but it did not take me there.

Also under review, it keeps bringing me back to form 1116, telling me to change the date, but if it is supposed to be the date I paid the Italian taxes, I have entered it correctly. It keeps saying that the "Date should be in the current tax year". I paid the Italian taxes in July of 2019 for the tax year 2018 so I am putting in that July date, and Turbo Tax doesn't it like it, I don't know why. Any ideas? 

[barthur]

The federal taxes that turbo tax is saying I owe, is approximately an eighth of what I paid for taxes in Italy so it seems I would NOT owe the US, correct? So since I am being told I owe, I guess that means I did not fill something out correctly...

[DoninGA]

The foreign taxes paid have to be in 2018.  If you did not pay any foreign taxes in 2018 then you have nothing to enter for the foreign taxes on the 2018 tax return.  You report the foreign taxes paid in 2019 on your 2019 tax return.

[barthur]

But they were paid for the tax year 2018 and I thought I was doing my 2018 taxes. Just like I will pay this year in 2019 in the US, for anything I owe on my 2018 return, I also paid what I owed in Italy, in 2019 for the 2018 year. 

I know that this accounting stuff is not my strong point but surely if I owed that money for my 2018 taxes in Italy, I'd be incorporating now, in my 2018 US taxes?