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Level 7

Where Should Foreign Withholding Tax Be Entered On New 1040?

What a fiasco! TurboTax entered my foreign tax withholding 1040 on line 16 (Federal Income tax withheld from forms W-2 and 1099). This withheld income is from from foreign earned income from a foreign company that has no relation to the US any US company. It's PURE foreign income. Now check this out..


I got a letter from the IRS that wanted the following because TurboTax listed my Foreign Withholding on line 16. Here's a quote form the letter:


"To support the amount of withholding on lines 16, form 1040, submit:

 * Form W-2, Wage and Tax Statement (which I did, I translated my Japanese Wage and Tax Statement and converted the YEN to USD.)
* Form 1042-S, Foreign Person's U.S. source Income Subject to withholding.
* Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax
* Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of the U.S. Real Property Interests.
any other U.S. withholding document."

ARE YOU KIDDING ME! I never have had to do this for all the 11 years filing with TurboTax. I always get my refund.

I noticed that this year 2019 - filing for tax year 2018 the IRS changed the 1040. The old, pre-tax year 2018, had a line 21, Other Income. List type and amount, where TurboTax correctly said: "Form 2555-Foreign Earned Inc along with the ( - ) minus number (my foreign withholding). Now with the new tax form for 2018 tax year, there's no line for "Other Income"


My guess is, since there is NO place to list my Foreign Withholding EXCEPT ON LINE 16, thus triggering the above letter from the IRS.


So, my question: Where should my Foreign Withholding be entered? If line 16, why do I get all those other forms from the IRS?

2 Replies
Level 14

Where Should Foreign Withholding Tax Be Entered On New 1040?

the credit goes on Form 1116. 


where did you list the foreign income?


Also, I assume you are a US citizen who are required to list their world wide income on their tax returns.  So even though it's a PURE foreign company, your citizenship requires the reporting. 

Level 7

Where Should Foreign Withholding Tax Be Entered On New 1040?

Thank you for your reply.

I'm not sure about Form 1116.

TurboTax always fills out form 2555, Foreign Earned Income, where on Part VIII (Taxpayers Claiming the Housing Exclusion, Foreign Earned Income Exclusion, or Both) Line 45, where my total foreign income is listed with the instructions that say: Enter the result here and in parenthesis on Schedule 1 (Form 1040), line 21. Next to the amount, enter "Form 2555". The amount was listed as a negative.

Next, On schedule1 form 1040, line 22, my negative gross earnings was instructed to be entered on form 1040 Line 6..

Next, after doing the Standard deductions line 8 my total tax came to 0.0 on line 15 (1040)

Then on line 16, Federal Income tax withheld from Forms W-2 and 1099, was the withholding amount of my foreign income. 


In regards to my requiring to report my foreign earned income, I've always filed ever since I moved overseas. I've been using TurboTax for 11 years to help me file my foreign earned income (2555) along with the 1040. This is the first time to get a request for all the above mention forms in my first post. Doesn't make sense. Sounds like the IRS thinks I'm working for a US company or a Foreign Company that has some kind of US ties or connection. This is not the case. The company I work for is a small company that has no ties nor connections to anything US related.


I personally believe that the IRS person that reviewed my return made a mistake. Hey, we're human, it can happen. I'm hoping that this is this case. Even though the 2018 1040 is a new form the lines are still there though in different places. On all my previous tax forms there was line 64 on the "old 1040 - pre 2018" that said: "Federal Income tax withheld from Forms W-2 and 1099 which is EXACTLY THE SAME AS line 16 on the new 1040  2018 form.


Anyhow, I have a call scheduled with TurboTax, hopefully they can give me some advice. Thank you again for your reply.