Client worked Iraq for 3 months.Earned $110M. Paid $10,000 in Iraq income taxes. Is this a deduction on Schedule A or a foreign tax credit? It was in Box 14 of his W-2?

Forum|Forum|6 years ago
December 7, 2019
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Best answer by itonewbie

The foreign tax was probably grossed up by your client's employer. Inclusion of taxes paid as compensation is not sufficient for substantiating foreign tax credit or deduction; you'd need an Iraqi tax return and proof of tax payment.

It's almost always better claiming FTC. To claim FTC for Iraqi income tax, you'd also need to establish how much of the W-2 income is actually foreign source.

itonewbieAnswer

Level 15

The foreign tax was probably grossed up by your client's employer. Inclusion of taxes paid as compensation is not sufficient for substantiating foreign tax credit or deduction; you'd need an Iraqi tax return and proof of tax payment.

It's almost always better claiming FTC. To claim FTC for Iraqi income tax, you'd also need to establish how much of the W-2 income is actually foreign source.

---------------------------------------------------------------------------------Still an AllStar

S

Sharp Consultants

Level 2

Dear Community Members -

Not sure how to go about this but I just want to claim FTC and not FEIE, however, since I now have an entry on Form 2555 (i.e. breakdown of the Non-W-2 salary), ProSeries automatically applies the exclusion. My clients would like to use the FTC as its more beneficial to her.

Any thoughts on where I can find the check box to force FTC?

Thanks

Accountant-Man

Level 13

Yes, it can be either.

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