Paul Siu <paulsiu2...[at]deletethisexcite.com> wrote:
- quote -

The question remains... did he actually pay those taxes or
were they withheld from pay for later use to pay the tax
bill?

He may not be taxable according to the UK-US tax convention.
Some conventions specify that if you earn less than X in a
contracting state other than your residence, the contracting
state will not tax that amount. If that is the case, it
would not matter how many times you complete Form 1116 as
you are not taxable in that contracting state. They are not
entitled to tax your income. You have to get the money
withheld back.

In your case, I suspect that your nephew is entitled to get
the Foreign Tax Credit as he isn't taxable in the UK. He has
to file a UK tax return to get the money back. The money he
paid was paid in error.

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parrisbraeside[at]yahoo.ca <f5618k$179$1[at]panix1.panix.com> wrote:
- quote -

Of course Sch A allows a deduction for foreign taxes paid.

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

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K Williams wrote:

- quote -

Well, this is essentially what he did. He filled out Form
1116. The UK taxes were higher than the US, so he we use
that to offset the US tax, reducing it to nothing. He was
not expecting a refund, just that he paid nothing.

Unfortunately, the IRS have sent him a notice that he owe
the full amount (without the foreign deduction). Either the
form 1116 was filled out incorrect or there are some other
requirements we are missing. The documentation is not clear.
I guess he can send back an appeal listing the publication
and page number on why he should not pay the tax?

Paul

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"Paul Siu" <paulsiu2003[at]deletethisexcite.com> wrote:

- quote -

First of all, you need to take a good look at the IRS
notice. Determine if it is referring to the foreign tax
credit.

Call the number on the notice. Find out what you need to do
in order to apply the foreign tax credit.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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Paul Siu <paulsiu2...[at]deletethisexcite.com> wrote:

- quote -

One thing most people forget is that "withheld from the pay
cheque" does not mean "paid". Generally, you have to file a
tax return to find out how much you "paid" as opposed to
having the money taken off the cheque.

As for your problem, the first thing to do is to get the UK
Tax Return. (Contrary to what most people think, UK
residents do have a tax return to the filed!) Once you have
that, you can determine what is the tax payable on that
income. The credit allowed on the that tax is the Foreign
Tax Credit. Do you mean that you claimed a Schedule A
Deduction on the taxes paid on earned income in a foreign
country? Schedule A allows for Property Taxes and Sales
Taxes only, not Foreign Taxes.

This is generally better referred to a specialist in the
handling of UK-US Income Taxes.

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Paul Siu wrote:

- quote -

Yes, assuming he declared the income on his US tax return
and he completes IRS Form 1116 and posts the result from
that form to IRS Form 1040 Line 47. He may not just post
the amount paid to Line 47 without completing Form 1116 even
if the amount was $300 or less.

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Paul Siu <paulsiu2003[at]deletethisexcite.com> wrote:

- quote -

The short answer is that, yes, the UK taxes paid are
creditable against any US tax on the same income.

However, there are limits on the credit that may be claimed
and, except for a few simple situations, you must file Form
1116 to calculate the amount of credit. If you merely
claimed a credit for the amount of UK taxes paid, you likely
claimed too much.

In effect, you get a credit equal to the US tax on the
double taxed income or the foreign tax, whichever is lower,
If UK rates applied to your cousin's income are higher than
his US tax rate he cannot take the full amount as credit.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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My cousin had a short summer job as an intern in the UK. He
made some money and paid taxes to the UK Government. When he
filed his taxes, he attempted to claim tax credit for the
income tax paid to the UK. We thought this would work
according to the IRS documentation, but he recently got a
letter from the IRS that he owe money.

Can he claim the taxes he paid in the UK as a foriegn tax
credit to reduce his taxes?

Thanks.

Paul


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