Could Someone Give me Advice on Filing Jointly with Foreign Income?

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elijaa
elijaa Member Posts: 4 Newcomer

Hello there,

I am new to using FreeTaxUSA and could use some guidance on a specific situation. My spouse and I are planning to file jointly for the first time this year; and we have a bit of a complicated scenario involving foreign ;income.

My spouse worked abroad for part of the year and earned income from that employment. We are unsure about how to correctly report this foreign income on our joint tax return. Is there a specific section in FreeTa;xUSA where we can input this information?

I have read that we might be eligible for a Foreign Tax Credit to avoid double taxation. How do we go about claiming this credit on; FreeTaxUSA? Are there any particular forms we need to fill out or additional steps we should be aware of?

The income was earned in a foreign currency. What is the best way to handle currency conversion for tax reporti;ng purposes? Does FreeTaxUSA provide a tool for this, or do we need to use an external source for the correct exchange rates?

What kind of documentation should we keep on hand in case of an audit? Is it enough to have pay stubs and a letter from the foreign employer, or should w;e be preparing additional records?

Also, I have gone through this post; https://community.freetaxusa.com/discussion/104/foreign-earned-income-foreign-ccsp-paid which definitely helped me out a lot.

We want to make sure we are compliant and accurately reporting all necessary information. We are also open to recommendations for any specific guides or tutorials that FreeTaxUSA might offer for handling foreign income and related tax credits.

Thanks in advance for your help and assistance.

Comments

  • KristineS
    KristineS FreeTaxUSA Agent Posts: 118
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    Hi elijaa,

    Thanks for writing in.

    U.S. citizens and residents are required to report all worldwide income on Form 1040. You may use a conversion service such as Fiscal Data, an official Treasury.gov website, and we recommond you print out the website results showing all conversion information. Keep this with your important tax documents including any letter, statement, or paystubs from an employer.

    Foreign income taxes paid can be taken as a credit on Form 1116 or as an Itemized Deduction on Schedule A. The Foreign Tax Credit is generally the better option since a credit will usually reduce your tax liability dollar for dollar.

    Our software only supports the foreign tax credit when the foreign income and taxes are reported on a K-1Form 1099-INT or Form 1099-DIV. If you have paid foreign income taxes on income other than interest or dividend income reported on one of those two forms, our software will not be able to support your situation at this time.