tax-treat income claim

[jxmaster2000]

I'm a researcher, and based on US tax treaty with other country, I'm eligible for tax-exempt income. I also filed for no withheld, so on my W-2 this year, it reports 0 because non are federal-taxable. But in turbotax, I was categorized as low-income. Which I feel may not be true and impacts assessment of my other credits. I wonder where can I enter the adjusted income to show this for better assessment?

Also, would I need to file e-file or paper for this tax-treaty claim situation?

[ThomasM125]

You should report your W-2 income as it is stated on your W-2 form. If you have foreign income that is not reported on the W-2 form, you can enter it in the Less Common Income section of TurboTax, then Foreign Earned Income and Exclusion. You'll be asked if your foreign income was reported on your W-2 form, to which you have to enter "no" if that is true.  You don't have to apply for the exclusion to enter your foreign income in that section. 

The way the tax treaty income exemption works is you report your income and then enter a negative adjustment to remove the income exempted by the treaty. Since you are entering your foreign income and then exempting it, I'm not sure if there will be any tax benefit to you regarding tax credits though.

You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the treaty and the adjustment as a negative number

You must complete Form 8833 Treaty-Based return position disclosure and include with your return. That form is not available in TurboTax, so you will need to complete that separately and attach it to your tax return that you would mail in. Here is a link to the form:  Treaty income adjustment

[jxmaster2000]

Hi Thomas @ThomasM125 . My income is not foreign income. It is just because of tax-treaty, my income for research is currently tax exempt for three years, like that of here or here. The only thing is that showing income here, I would be recognized as low-income (although I should not be). Is this something that can be fixed in turbotax?

[ThomasM125]

There's not going to be a way to enter additional wage income in TurboTax without getting your W-2 form corrected. If you think is was not completed properly, you would have to request a corrected form from your employer. Also, I'm not sure what credits you are referring to, but normally you can't "double dip" on tax credits, meaning if the income the credit is based on is not includable on your tax return, you most likely don't qualify for a tax credit based on it.

[jxmaster2000]

Hi Thomas @ThomasM125 , the problem is that because of my situation (none on W-2), I automatically get somethings like earned income credit. The system automatically adds these to me. Is there a way to adjust or turn off these credits in TurboTax?

[ThomasM125]

An earned income credit can be an automatic calculation based on the information you entered on your return, so you may be entitled to it. It would reduce your tax so you would want to keep it if entitled. You can check one of the boxes on this screen you will see in the earned income credit section in TurboTax and it should remove it if that is what you want to do: