Dependent care credits - working for a foreign organization

[harshmdi]

Hi - i work for a foreign organization Goethe Institute. I reported my income as advised here by the turbo tax expert under 1099-misc 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/income-from-an-international-org...

However this is causing an issue with the dependent care credits. My spouse contributed money to dependent care FSA which is now being considered taxable and we are not able to claim credits as Turbo tax is saying both spouses need earned income. Basically its not considering my income as earned income. How do i get this working?

[AmyC]

Laws and the program change so let me give the correct steps for TY25. You  will need to report this on Sch C to get the income to act as income for a contractor. You will be able to enter any expenses as well.

If you are a US citizen or resident alien you need to pay the Medicare and Social Security tax as well.  The Sch C will trigger the tax. 

This will allow you to claim all the credits and move forward.

Reference:

• How does contract or freelance work affect my taxes?
•  Where do I enter Schedule C?
• Where do I enter my self-employment business expenses, like home office, vehicle mileage, and suppli...
• Why am I paying self-employment tax?

[harshmdi]

Thanks Amy 

I am a resident alien and the IRS link posted here says I need to report these as wages. wouldn’t reporting on schedule c trigger self employment taxes?

https://www.irs.gov/individuals/international-taxpayers/employees-of-a-foreign-government-or-interna....

Green card holders (lawful permanent resident)

If you are a green card holder working for a foreign government or international organization, you generally must report your earnings as wages but are not subject to self-employment taxes on those earnings and may not voluntarily pay self-employment tax on those earnings.

[ThomasM125]

Yes, reporting the income as self-employment income on a schedule C would trigger self-employment tax. To avoid that and still have the income reported as wages,  you can report it in the Foreign Earned Income and Exclusion section, which you will find under Less Common Income in the Wages and Income area of TurboTax. Choose the Statement from my Employer option on the screen that says What form was your foreign income reported on. You will then see an option to enter your wages on the screen that says Enter your Foreign Earned Wages. You wages will appear on line 1(h) of your Form 1040 as Other Earned Income.

[harshmdi]

Ok thanks. All of the income was earned in the United States. It’s ok to report that as foreign income? 

[AmyC]

No. Green card holder makes a difference and earned in the US. Thank you for that additional information. You are not subject to SE tax so you want to report it as other wages. If you are using the desktop program, we can go into Forms mode and force a link to allow the credits. Using the online version, I keep running into stumbling blocks and can only see a substitute w2 working -which requires mailing your return so that isn't the most helpful.

See Desktop Manual Forms where you can force your income to attach where needed. I suggest the desktop version. You can easily download from online and pick up where you left off. See How do I switch?

[harshmdi]

Thank you. I am using the desktop version. Can you please provide me instructions to force the credits?

Another option I found was going to miscellaneous income and other earned income. This reports as wages, no schedule C and allows dependent credits. Is this a valid option?