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My question is: Is the foreign tax credit 100% Offset to the…

Hi, my question is...

Hi, my question is: Is the foreign tax credit 100% Offset to the Alternative Minimum Tax, if there are only foreign income?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I´m a Greencard holder and I live in Germany. My only income is as a employee in Germany.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

No, I don´t think so.

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1/17/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,387
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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The alternative minimum tax (AMT) foreign tax credit may be claimed by taxpayer’s in computing their tentative minimum tax. The AMT foreign tax credit is similar to the foreign tax credit for regular income tax purposes, except that it is limited to the foreign tax on foreign source alternative minimum taxable income (AMTI) instead of foreign tax on regular taxable income.

You must prepare separate Forms 1116 to compute the foreign tax credit and foreign tax credit limitation for alternative minimum tax purposes.

If you owe AMT, you may be able to lower your total tax (regular tax plus AMT) by claiming itemized deductions on Form 1040, even if your total itemized deductions are less than the standard deduction. This is because the standard deduction isn’t allowed for the AMT and, if you claim the standard deduction on Form 1040, you can’t claim itemized deductions for the AMT.

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Customer reply replied 7 months ago
My Income as an employee in Germany ist 253,251 US-Dollars. There i no other income in Germany and no other income in the USA. I paid 59,309 US-Dollars German-Tax. The IRS sends me a letter and reduced the AMT only with 48,697 US-Dollars as a alternative Minimum tax foreign tax credit. Is this possible? Why can`t I Offset the whole foreign tax?

The calculation is done on a ratio. The AMT foreign tax credit cannot exceed your tentative minimum tax multiplied by the ratio of your foreign source AMTI to worldwide AMTI.

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Customer reply replied 7 months ago
The IRS calculated 50,269 AMT. The only income is employee-income in Germany. I paid 59,309 $ German-Tax. The IRS Offset 48,697 $ as foreign tax credit, so they demand 1,572 $. But i don´t understand Ratio. There is no other taxable income. Not in the USA and not in Germany. So why is the IRS cutting the paid German Tax? Thanks for your Patience!

The IRS limits the foreign tax credit you can claim to the lesser of the amount of foreign taxes paid or the U.S. tax liability on the foreign income.

Can you redact your personal info (name and SSN) and attach the actual notice page

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Customer reply replied 7 months ago

The Name is Andreas ***********, SSN: *************.

They used the Alternative Minimum Tax Foreign Tax Credit amount instead of the regular Foreign tax because it was the lesser of the 2. The AMT foreign tax credit cannot exceed your tentative minimum tax .

Then the difference in the tax paid and the AMT Foreign Tax Credit is the $1571 tax amount.

I do not see the computation for the 1116 worksheet but that is the reason. You can look back to your own worksheet that you completed. If you did not do the worksheet then that is why the IRS changed the amount.

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Customer reply replied 7 months ago
Att. my 1116 worksheet and the Form 4549. So is the IRS right and I have to pay the Balance due?

Yes the IRS is correct.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,387
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D. and 87 other Tax Specialists are ready to help you
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Customer reply replied 7 months ago
Thank you Robin! Five Stars!

I know this is a very complex situation and I wish I could have told you no that he IRS was not correct

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