I was on H1B visa. Myself, my spouse and 2 kids all moved out of USA in Aug 2018,how can i get exemption on penalty for not having health coverage for rest of the year?

[KarenJ]

If you moved out of the US in August 2018, you need to either file a full year US resident tax return declaring your worldwide income for calendar year 2018 (and claiming foreign tax credit to help offset any foreign income earned from August to December 2018) or you will have to file a Dual Status return (part year resident and part year nonresident).

Dual Status returns are a bit complicated and you are not allowed the standard deduction and must file married filing separately.  Please see Publication 519 page 32  https://www.irs.gov/pub/irs-pdf/p519.pdf

If you file a dual status return, you will be able to take an exemption for the months you were not in the US.

If you file a full year resident return, you may qualify under the physical presence test where you are overseas for 330 days in any 12 month period. You can claim the coverage exemption for any month during your tax year that’s included in the 12-month period.

[samit345]

i have not returned back to USA after Aug 2018, in this case if i fill full year US resident tax return do i need to mention any foreign income ?

[KarenJ]

Yes, if you file a return in TurboTax, you must declare your worldwide income for calendar year 2018.

[samit345]

If i have paid tax for that income in the country where i earned it then also ?

[KarenJ]

In TurboTax you need to enter your foreign wages and then enter your foreign tax that you paid on these wages to help offset any double taxation.

You  need to go to  the foreign earned income section of TurboTax (enter "foreign income" (without the quotes) in the search box at the top of your screen and click the Jump to link). For your  foreign wages, enter them here.  Since you are not taking the foreign earned income exlcusion,  after a number of screens you will see the following screen:  Would you like to try and exclude your foreign earned income?  Click No.

To report your foreign tax paid on your wages for foreign tax credit:

    Enter foreign tax credit in the search box at the top of the page and click the Jump to link
    Click 'Yes" you paid foreign taxes
    Click through the screens regarding foreign interest and dividends
    Click yes that you have reported all your foreign income already in TurboTax
    Click that you want to take a credit
    Answer question about the Simplified Limitation Election
    Choose income type for wages- it will be General category income
    Add XXX as the country
    Enter description -XXX wages
    Enter wage amount that you previously reported in TurboTax
    Enter your taxes you paid on your foreign income in the box "Other income"
    Continue through ALL the foreign tax credit screens until done.