On Jun 3, 9:35 am, emaildevn...[at]yahoo.com (emaildev) wrote:
- quote -

I have not verified your math but:
1 - You can't take FTC on income which has been excluded through FEIE.
2 - As there are children, it is possible that FEIE is to your
client's benefit. Check out FTC by itself. (Though the IRA Early
Distribution may have done your client in for the claim for CTC.)

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On Jun 3, 6:35*am, emaildevn...[at]yahoo.com (emaildev) wrote:

- quote -

In addition to Art's points (BTW the instructions for reducing the
foreign tax because of the foreign earned income credit is in line 12
of form 1116), the AMT tax seems kind of high. Did you calculate the
AMT foreign tax credit (line 32) correctly or even at all?

The best way to reduce the tax bill is to try to not take the early
distribution or use one of the "loopholes" to eliminate the penalty.
These are to take enough money from your IRA each year till age
max(59.5, currentAge+5), first time home purchase up to 10k, qualified
education expenses, qualified medical expenses, etc. This advice
applies even to people living in the US. See
http://www.smartmoney.com/retirement...?story=tapping

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <48454459$0$5274$a82e2bb9[at]reader.athenanews.com> ,
emaildev <emaildevnull[at]yahoo.com> wrote:
- quote -


I didn't check the math or the current FEIE amount, but I have
two comments.



1. The FTC is not taken on any FEIE. So only foreign tax allocable to
the foreign earned incomenot qualifying for exclusion is allowed.


2. Use form 2555 to help figure income tax. Your method is the old
method that existed up until about three years ago where foreign
earned income was stacked on top of other income, so the foreign
earned income that was excluded was the highest taxed income.

Now the new method, which also indexed the FEIE amount, stacks
foreign earned income beneath other income. That means the
exclusion applies to low-taxed income, and the IRA distribution
is taxed at the highest rate before the low rate FEI is excluded.
--


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

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Hello:

I have a client whose foreign earned income is $110K with a foreign income
tax of $28K. He is trying to take an early IRA distribution of $125K. Are
the following
tax calculations correct:

W2 Income: $110K
Early Dist: $125K
Less FEI Exclusion (-$85K) = $150K
Less Standard Deduction (Married filing joint with 2 kids -10.7K+13.6K) =
$125K

Tax on above = $35K
Additional tax AMT (+12K)= $47K
Less Foreign Tax Credit (-$25K) = $22K
Additional Early Dist Penalty (+$12.5K) = $34.5K

My question is does the above tax calculation accurate with respect to the
tax credit & exclusion. Can both FTC & FEIE be claimed? Is there another
way
to reduce the clients tax liability.

Regards
Dev

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >