Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I have over $300K of foreign tax credits available for me to…

Customer Question
I have over $300K of...
I have over $300K of foreign tax credits available for me to use while I was an XPAT outside the U.S. I am now back in the U.S. and only spend a few days working overseas. I am looking for tax strategies where I could possible use up these credits. For example, could if I generated investment income outside the U.S. could these tax credits be used to offset those gains?
Submitted: 1 month ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 40 minutes by:
1/13/2018
Tax Professional: Charles Markham, EA, MST, USTCP replied 1 month ago
Charles Markham
Charles Markham, EA, MST, USTCP
Category: Tax
Satisfied Customers: 774
Experience: IRS Enrolled Agent, US Tax Court Practitioner
Verified

Hello, first off, you mentioned that you now spend only a few days working overseas. I think that means you realize something that many tax accountants don't realize that even now whenever you are outside the U S on the job you can prorate your wages and consider this foreign income and then put this income on a Form 1116 and "soak up" this foreign tax credit.

So, with this much at stake and a number of years to collect it, it might behoove you to find a job with a bit more foreign exposure although I have one MD client who has all these foreign tax credits and takes a working vacation now where she goes to foreign conferences and we soak up her credits.

Now in answer to your question, sure, if you can find foreign stocks that generate dividends where there is little or no foreign withholding but they are clearly foreign income then you can offset those.

Finally if you bought a piece of foreign property and it appreciated but once again, you would need to be in a place where they don't tax capital gains, but a lot of foreign countries don't.

Another thought, getting back to compensation, if while you were abroad, you were vesting in stock options, or some other plan, and the final vesting takes place here in the US you can trace the foreign portion of that vesting to its foreign origins and call it foreign income.

Hope all that helps.

Ask Your Own Tax Question
Tax Professional: Charles Markham, EA, MST, USTCP replied 1 month ago

Sorry one final thought...foreign tax credits can get carried one year back...one years were you an expat? The rules for foreign taxes go very far back.

Ask Your Own Tax Question
Tax Professional: Charles Markham, EA, MST, USTCP replied 1 month ago

I'm sorry, I fat fingered my last sentence, I meant to type.."What years were you an expat?" (The rules for foreign taxes allow one to go back many years)

Ask Your Own Tax Question
Customer reply replied 1 month ago
Thanks. Not really feasible for me to find another job. I was overseas 2008-2012 with foreign taxes paid until 2015. A few follow-up questions:
- I do spend a lot more time traveling outside the U.S. and taking vacation days (1 month per year). As a lot of professionals do we are always working at the same time several hours a day on emails, calls, presentation material etc.. What is the trigger point where you can claim these days towards foreign earned income?
- What types of foreign income can I offset against foreign tax credit credits generated by regular wages? For example, could I offset foreign passive income? I could always invest in mutual funds with a large percentage of foreign stock and high dividend payout but not sure this type of income would cross over.
- What documentation to you need to retain aa evidence of the foreign income? E.g. flight tickets etc.Thanks
Customer reply replied 1 month ago
Forgot to mentioned I was aware of the pro-ration rule and already apply this rule against bonuses. The problem is that my credits will start expiring in a few years and need to see if there is a better strategy to absorb them or they will start expiring.
Tax Professional: Charles Markham, EA, MST, USTCP replied 1 month ago

One of the reasons I asked about the years involved is that excess foreign credits are supposed to be carried back one year (that is, to 2007) BEFORE they are carried forward.

Thus, if you had foreign wages (using the same I happen to be out of the country logic in 2007) you might consider filing an amended return--you might still be in the statute of limitations. There is a special rule regarding foreign tax credits for filing amended returns.

The problem with foreign mutual funds is that they will generate tax credits and you're going to have the same problem, you almost need to find specific foreign stocks.

The way to move the foreign tax credits between the various classes of income is via something called "High Tax Kick Out" "HTKO" which can be done when you were taxed more than 20% which I am thinking you were.

In answer to your vacation vs. working question, the work has to be somehow linked to the fact that you are abroad. So the problem with checking emails is that by its very nature can eb done anywhere. ditto on the phone etc. If you could find things to do that only could be done abroad (meeting with certain people, doing certain research etc.) then you would have

grounds for calling it foreign business.

I'm sorry there's no silver bullet here. Finding some sort of active business investment like the foreign equivalent of an S corporation or a partnership that generates income would be in the same bucket as the wages (business income), buy rental property?, and that would eat up these credits.

Ask Your Own Tax Question
Was this answer helpful?
Ask Wallstreet Esq. Your Own Question
Wallstreet Esq.
Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 586
586 Satisfied Customers
Experience: 10 years experience

Wallstreet Esq. is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,312 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,362 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

14,120 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,652 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
If I take the foreign earned income exclusion on my client,
If I take the foreign earned income exclusion on my client, I am assuming I can not deduct the taxes withheld by Canada? Thanks, ***** ***** EA… read more
Carter McBride
Carter McBride
LLM
459 satisfied customers
Is there a statute of limitations on owing State taxes -
Hello - is there a statute of limitations on owing State taxes - Maryland … read more
Carter McBride
Carter McBride
LLM
459 satisfied customers
I own a rental property under an LLC partnership. I am in
I own a rental property under an LLC partnership. I am in the middle of filling my Form 1065, 8825, 4562. I need to enter assets that I installed in the rental property in 2017. I installed a water he… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,336 satisfied customers
Do I pay capital gains on rental property sold in 2017 if I
do I pay capital gains on rental property sold in 2017 if I bought a house in 2018? … read more
abci168
abci168
Principal
27 satisfied customers
Foreign earned income exclusion expert: Can a US civilian
Foreign earned income exclusion expert: Can a US civilian independent contractor of State Department working in a combat zone, claim foreign earned income exclusion for physical presence test if he wa… read more
Carter McBride
Carter McBride
LLM
459 satisfied customers
The loss as K-1 of a partnership effecting the Earned Income
the loss as K-1 of a partnership effecting the Earned Income Credit. in other words more the loss is the lesser is Earned Income Credit we get. Is this something they introduces this year of taxes or … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
My question is: Is the foreign tax credit 100% Offset to the
Hi, my question is: Is the foreign tax credit 100% Offset to the Alternative Minimum Tax, if there are only foreign income? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
Ied dividend and capital gains worksheet no longer
ied dividend and capital gains worksheet no longer available … read more
Carter McBride
Carter McBride
LLM
459 satisfied customers
New tax rules Taxpayer owns several rental properties. Does
New tax rulesTaxpayer owns several rental properties. Does the $10K tax limit apply to the real estate property tax associated with each rental property? Or is it just for schedule A state and local t… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I plan to declare some foreign interest and dividends
I plan to declare some foreign interest and dividends totaling about 3000 pounds in each of the last 3 years, on some of which i suffered withholding tax at source. I have not been submitting an annua… read more
taxmanrog
taxmanrog
Master\u0027s Degree
817 satisfied customers
How much is UK Corporation Tax on foreign dividends received
Hi Tony,How much is UK Corporation Tax on foreign dividends received from Honk Kong subsidiary?The recipient of such dividends is UK based Limited company. Are these foreign dividends exempt for a "sm… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,077 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I sold a rental property at a loss (no capital gains);
I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
RE: FOREIGN TAX CREDIT We're filing a married joint filing
RE: FOREIGN TAX CREDIT We're filing a married joint filing tax return and have come up against some problems on form 1116. 1) Do we add both our names on the form? 2) On line 3a, it asks for certain i… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,077 satisfied customers
I have a foreign tax credit carryover from 2016 to 2017 and
I have a foreign tax credit carryover from 2016 to 2017 and am wondering if i can take it even though I have no foreign sourced income in 2017 … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,077 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
I am looking at the form 1116 (foreign tax credit). I have
I am looking at the form 1116 (foreign tax credit). I have paid $30,000 in taxes in the UK (I live all year here), the US tax says line 22 on the form can only be 21,000. Where do I report the carry o… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have to use form 1116 for a foreign tax credit line 14
I have to use form 1116 for a foreign tax credit line 14 code B the amount is 108, I got to putting in the country which is various, where do I put the 108 … read more
Anne
Anne
Master Tax Preparer
1,328 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x