Will Form 8854 Greenback 2023-2024

Hi everybody, my name is David McKee. I work for Greenback Expat Tax Services. Our question today is, do I have to file Form 1116 in order to claim the foreign tax credit? Now, if you plan to use the foreign tax credit, you generally need to elect this by filing Form 1116. However, there are some exceptions. You can use the foreign tax credit without Form 1116 if the following apply: - Your only source of foreign income for the tax year is passive income. - Your qualified foreign taxes for the year are not more than three hundred US dollars, or six hundred US dollars if you're filing a joint return. - All of your gross foreign income and foreign taxes are reported to you on a piggy statement, such as a form 1099 dividend. - You elect this procedure for the tax year. Generally, this is only applicable to individuals with a small amount of income that they're paying taxes on, such as owning shares of a foreign corporation and receiving a small dividend amount like 200 dollars. In those cases, the IRS does not require you to file Form 1116, but you can still claim the foreign tax credit on the dividend or interest income that you earned on those assets. Now, I just want to clarify one thing about the foreign tax credit. It is a dollar-for-dollar credit against the taxes you would owe to the IRS. It reduces your US tax burden dollar-for-dollar. However, you cannot double dip. If you're using Form 2555, the foreign earned income exclusion, to exclude your wages from US taxation, you cannot use the foreign tax credit on that same income twice. For example, if you earned $200,000 while overseas and you can exclude $100,000 of that using the foreign earned income exclusion, if you paid $60,000...