Video instructions and help with filling out and completing What Form 2220 Abroad

Instructions and Help about What Form 2220 Abroad

Welcome to the IRS 'as international individual taxpayers assistance video series do you know that if you paid tax to a foreign country you may be able to claim a foreign tax credit learn the steps to determine if you can claim the foreign tax you paid as a credit on your federal income tax return step 1 did you pay or accrue tax to a foreign country in most cases you can claim the credit only if you paid or accrued the tax to a foreign country or US possession in some cases you can claim the credit even if you did not directly paid or accrued the tax yourself for example if you file a joint income tax return you can claim the credit based on the total foreign income taxes paid or accrued by you and your spouse refer to publication 5:1 for foreign tax credit for individuals you can get it by going to RS gov and typing pub 5-1 for in the search box if you did not pay or accrue tax to a foreign country you are not qualified for the foreign tax credit but if you answered yes move on to step 2 were you the one legally liable for the tax you can claim a credit only if you have the legal liability for the foreign taxes you paid for example a tax that is deducted from your wages qualifies as a tax you are legally liable for if you answered yes now move on to step 3 ask yourself if it was an actual foreign tax liability you cannot take a foreign tax credit if it is reasonably certain you will get the amount back as a refund credit rebate or other payment if you made a claim for example if you earned $100 of interest income from a foreign bank the bank may have withheld $30 as foreign tax however based on the US tax treaty with the foreign country you can claim a refund in the amount of $20 therefore your actual foreign tax liability is $10 and not the 30 dollars the bank withheld if you answered yes the tax was an actual foreign tax liability continue with step 4 was the foreign tax and income tax or a tax in lieu of an income tax examples include the following withholding tax on your wages earned abroad is an income tax a foreign tax imposed on gross income gross receipts or sales or the number of units produced or exported is a tax in lieu of an income tax the value-added tax or VAT you paid on items you purchased is not an income tax or a tax in lieu of an income tax if you answered no to any of the previous four questions stop because you generally cannot claim a foreign tax credit please refer to publication five one four and the instructions for form 1 1 1 6 foreign tax credit back to our series of questions if you answered yes the foreign tax was an income tax or tax paid in lieu of an income tax continue with this last step did you claim the foreign earned income exclusion or the foreign housing exclusion on any part of the qualifying foreign income refer to publication 50 for tax guide for US citizens and resident aliens abroad for more information on the foreign earned income exclusion and foreign housing exclusion did you answer yes to the first four questions did you pay or accrue tax to a foreign country were you legally liable for foreign tax was it an actual foreign tax liability and was it income tax or a tax in lieu of an income tax and no you didn't claim foreign earned income exclusion or foreign housing exclusion then you generally can claim the foreign tax credit although you may qualify to claim a foreign tax credit the amount you can claim may be limited your foreign tax credit cannot be more than the total u.s. tax liability on your foreign taxable income to figure it take your taxable income from sources outside the United States and divide it by your total taxable income from u.s. and foreign sources then multiply that number by your total u.s. tax liability any amount in excess of the allowed foreign tax credit amount can be carried forward to future years consult publication five one four and the instructions for form 1 1 1 6 for more information now if you answered yes to the previous questions and you also claimed either the foreign earned income or housing exclusion then you cannot take a credit on foreign tax paid or accrued on this excluded income for more information and examples see the section titled taxes on excluded income in publication 5 1 4 & 4 additional information overall go to irs.gov and type international taxpayers in the search box