Foreign credit vs. foreign income exclusion

[treasur2]

My first foreign income return.

Can a tp take the foreign tax credit without the foreign income exclusion? Another words, include the income but take the credit?

I can't figure out how to get pro series to do this.

[itonewbie · Accepted solution]

Yes, it is permissible to claim the foreign earned income exclusion and FTC, except the credit (along other deductions) must be reduced to the extent allocable to the exclusion.  For straight forward cases, ProSeries should handle that without your intervention, generally.

If your client has paid or accrued foreign taxes in a fiscal year country or is a dual earner whose spouse also claims foreign earned income exclusion or if your client has allocable SLL/OFL/ODL, etc., you may then need to make certain adjustments on your own as Intuit's tax products are not programmed for those situations.

[treasur2]

No, INCLUDE the income, but tax the credit. I can't seem to get Pro-series to do that. This is a software as much as if not more than a tax question.

[itonewbie]

What you mean by "No, INCLUDE the income, but tax the credit"?

[itonewbie]

You have to include the income before you can take the exclusion.  You may then take a credit on foreign-source earned income that is not excluded under §911.

[itonewbie]

Ah, now that I re-read your question, I see that you want to forego the election for §911 but take a foreign tax credit instead.  Yes, you can do that but your client would be deemed to have revoked the election.  A full credit can then be claimed.  This could be beneficial for high-tax jurisdictions.

How did you enter the compensation and the sourcing for F.1116?  What outcome do you see now in the program?

[treasur2]

proseries is forcing taking the income exclusion.

[itonewbie]

It can't force you unless you have entered sufficient details for either BFR or PPT to qualify for the exclusion.  This article may help.
https://accountants-community.intuit.com/articles/1617032-how-to-enter-foreign-earned-income-when-th...

[Akinofe67]

Can Tax Payer be deemed as revoking §911 if they never elected it in the first place? I mean if client has always been taking the foreign tax credit from the inception and not foreign income exclusion. So they never elected the exclusion. IRS will not consider that Revoking? Would they? I have a client and they are just beginning to file their back year taxes since they moved abroad. I think it is beneficial to NOT EXCLUDE their foreign income and take the foreign credit.  Maybe in later years, we may consider electing the §911 for the TP. what do you think?

[MakinItRain]

Clicking on this article link takes me to an Enterprise SSO login (which I can't get in to). How can I access this from the Intuit Accountants Community?

[sharmoren0112]

I know the advantage of claiming the foreign income exclusion is it will reduce the taxes owed by the TP. Are there any disadvantages to taking it? My client tells me it will affect his citizenship if he doesn't report the income. He has dual citizenship in the US & in Germany. It looks like I'll report the exclusion on form 2555. What line or part of the form? Thank you!

[George4Tacks]

This search may help to replace the dead one in the post above. Foreign Income Exclusion