foreign tax credit

[esctan]

I have an individual who used to meet Bona Fide Residence test until 2020. He worked from his home in the U.S. all of 2021. As he failed both the Bona Fide residence test and physical presence test, Lacerte does not allow any foreign tax credit until I override the "compensation from form  2555(A) on worksheet 35.1 as an adjustment. I was with Lacerte support for 3 hours and I am surprised that such sophisticated software does not allow the calculation of foreign tax credit on foreign income. Does anyone has a better solution than "override"?

[sjrcpa]

Why don't you just enter the wages as wages and skip the 2555 entry since you're not using it?

Seems Lacerte is sophisticated enough to realize this.

[esctan]

I did try to put it on worksheet 10 but no foreign tax credit was coming thru, i.e. no gross income on form 1116, that's why I was on the phone with Lacerte yesterday and this morning. I was curious that must be another way that I have missed.

[CrichardsonEA]

If he lived in his US home all of 2021, the only FTC he could get would be FTC carryover from prior years and he could only get that if he had foreign income. If he had no foreign income that he was subject to double taxation on in 2021 there's no credit. If he was working for a foreign employer but in the US, that's not foreign income allowed for FTC unless he was required to pay taxes in the other country. At least that's what I recall from the rules (I have 2 foreign clients but they both still live in Europe).

[esctan]

The guy is supposed to work in China but for the pandemic and he pays taxes to China so the money is double taxed.  You did get me to think that it may not be foreign income. His family said he bought tickets to go back but flights were cancelled.