TurboTax grabs the top position as the number one tax preparation software. The software is incorporated with rich features that simplify the tax preparation complications. The software is so easy to use that it makes filing taxes like taking a stroll. No matter which industry you are in, you can find TurboTax version related to your business. If you are dealing with foreign currency then TurboTax foreign income platform will help you remain always accountable.
TurboTax helps in the easy filing of the foreign earned income.
Where the foreign tax credit (Form 1116) or deduction should be entered?
The foreign tax credit or the deduction amount should be mentioned at the same place. Once they have been done, you would need to go through the below-given steps:
- Sign in to TurboTax application,
- Go to the My return button,
- Open the return,
- Do a search for foreign tax credit
- Click the “Jump to” link in the search results
- Click Continue and thoroughly follow the instructions displayed on the screen.
If you are in a fix, whether to choose credit or deductions then credit should be your best bet. In case you choose to employ to take the credit, attaching Form 1116 becomes compulsory. This will allow you to take Foreign Tax Credit in case the situation demands it.
It is not possible to take credit or deduction for taxes paid where the foreign earned income is ruled out. The reason why this is so is that the expelled income is not taxed in the first place.
Certification for the Foreign Tax Credit:
There are times when you have paid or even owe taxes on foreign income that is also subject to the income tax of Canada. The foreign tax must be related to:
- An income tax or a tax instead of an income tax,
- Legal or foreign liability related to taxes and,
- Taxes Imposed on you.
You can easily apply for a credit for foreign taxes that are refundable and are used to accord subsidy to you or a relative. You are restricted to garner credit for taxes paid or accrued on income earned in countries when Canada has maintained the diplomatic relations.
Details & Purpose of Forms 2555 and 2555-EZ.
Form 2555 refers to the exclusions related to Foreign Earned Income. The main purpose of the form is to calculate the amount of foreign earned income and/or foreign housing you can expel from the total taxation value. The Form 2555-EZ is a simple version of the same form. You can easily add or remove the forms the return by following the below-mentioned steps.
Steps to Add or Remove form 2555 from Total Returns:
In order to add details for form 2555 within TurboTax Foreign Income section, you would need to follow the below-given steps:
- Log in to your TurboTax program.
- Go to the return button and click it.
- Then open your return page.
- Start to search the foreign income.
- Click the “Jump to” link button.
- Move ahead with the foreign income section by answering questions as you continue until you reach the screen. It prompts questions like the one given below then click accordingly:
- If Single: Want to expel your income earned in foreign currency?
- If Married: Choose the income, you would like to exclude.
- You need to click on the ‘Yes’ to add a 2555 or 2555-EZ form. And click No to remove it and you need to click continue and follow the instructions displayed on the screen.
Is it possible to file foreign earned income and expel using TurboTax?
Yes, it sure does is possible to file foreign earned income using the tax filing program. You can do this following the easy steps are given below:
- With your TurboTax logged in, click on the federal taxes tab. This you can find within Home & Business version of the program under the personal income section.
- Then click Wages & Income button.
- Now choose the link with the message “I will choose what I work on.”
- Scroll down to the screen “Your 20** Income Summary,” to the last section of the “Less Common Income.”
- Click the Start button for “Foreign Earned Income and Exclusion.”
How to Add TurboTax Foreign Income to the total Income?
You need to follow the suggested steps that can be added to your total income in CAD (Canadian Dollars) as other income. You can claim a foreign tax credit for any other taxes paid on this income.
To enter miscellaneous income in your foreign currency within TurboTax Online or Desktop version you have to follow the steps listed below:
- Start your TurboTax software.
- Go to your tax return page, and choose to click on “Federal Taxes” section.
- Then Click on “Wages & Income” tab and click on the “Personal Income” section within TurboTax Home & Business version.
- Click on “I will choose” tab.
- Move down on the screen to come to the section “Less Common Income”
- Select “Miscellaneous Income tab”. Choose the “start” button. You will also be asked to update if never updated.
- Start the other reportable income.
- If prompted “Any Other Taxable Income?”. Click Yes
- For other Taxable Income, you need to mention your foreign income.
- Make sure if you have paid your foreign taxes on this income, you will be able to take a foreign tax credit (in Canadian dollars CAD). From the deductions and credits section, click on the “Estimates and Other Taxes Paid” tab and then finally click on the foreign taxes section.
Where can you report Foreign Income?
For entering Foreign Earned Income go through the following:
- Click on Federal Taxes tab. You can find the section if you are using Home and Business version of the software.
- Click on Wages and Income (For Personal Income use Home and Business version)
- Click on “I will choose”.
- Move down to the section “Less Common Income”.
- Click on the Start button on Earned Income and Exclusion of your foreign currency.
Alternatively, you can enter 2555, foreign income in the Search box located on the program screen. Click on Jump to 2555 section of the foreign income to report the same.
Can TurboTax Foreign Income be Filed via Online?
You can report for Foreign Earned Income on a Canadian federal income tax return with Form 2555. Employ TurboTax to report the foreign earned income using the TT online editions of Deluxe, Premier or Home, and Business version. For this, you would need to visit the TurboTax website for the online edition. Please note that you will also be paying for the TT account fees, for which you would need a Canadian credit card with a Canadian billing address.
Another alternative is that you can use TurboTax Freedom Edition which can be used by visiting a separate website from the TurboTax online edition. The Freedom Edition is a richly featured, personal tax return program. It is available for free for both the federal and state tax returns.
For the eligibility for the free 2015 federal and state tax returns in Freedom Edition, you are supposed to fulfill one of the below requirements:
- Max 2015 AGI of $31,000; or
- Qualify for the Earned Income Tax Credit (EITC); or
- Had been served as active duty military (comprising of Reservists and National Guard). The maximum AGI set in 2015 for an activist is $62,000. Further, you also require a military-issued W-2.
- In order to use the freedom edition, visit the link here – http://turbotax.intuit.com/taxfreedom/
Hope you are now much sorted with your query “TurboTax Foreign Income”. If you need any more info. Or wants to talk to our TurboTax officials then give us a call.
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