Australian - foreign income, convert?

[WITAXLADY]

I need some help please.

I have the 2555 form

And the conversion value.

From the W-2 - how do i use the conversion?

No exemption as not enough days..

Just a summer job

Thank you,

D

[Lion EA]

Isn't the W-2 in US$? If his tax document is in AU$, then use the conversion value.

Isn't the 2555 form for excluding foreign income? You said he doesn't qualify for substantial presence test.

Did he pay Australian taxes? Can you use Form 1116 to take a foreign tax credit? Or, take an itemized deduction?

[WITAXLADY]

duh - yes it is in US $$'s

2555 - need to meet physical presence test?

And no Aussie taxes paid

 

so I guess very simple -

Thank you,

D

 

[Lion EA]

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

[WITAXLADY]

thank you - I did read that..

Interesting - if summer or short term

D

[Lion EA]

If summer or short term work for a foreign employer in a foreign country AND paying foreign tax to that country, your client will have a foreign tax credit on his federal return. If it's a high tax rate country, that can be a valuable credit.

[Catherine]

And use foreign employer compensation if you don't need the 2555 to exclude.

[WITAXLADY]

Sorry - what is foreign employer compensation?

and when I use the 1116 - the tax is $940 converted

but she only gets credit for $432?

Why does she lose so much?

Thx d

[Margaret CPA in OH]

The tax credit allowed is related to the ratio of foreign and domestic income and tax.  Just follow the lines on page 2 of the 1116.  It's pretty straightforward, assuming the page 1 entries are accurate.

[joanmcq]

I’m confused as to whether your client is a US person who worked in Australia for a summer job or an Australian who worked in the US.  In either case, the 2555 isn’t used. 
If client is US person with Australian earnings, put the wages on the FECWKS, and the income taxes paid on the 1116. Don’t forget to convert the Australian dollars to US dollars before putting the numbers on the return.

[Lion EA]

On 9/19/2021 at 9:33 PM, WITAXLADY said:

From the W-2

No exemption as not enough days..

Just a summer job

Did she receive a US Form W-2 with US taxes withheld?  Or, did she pay Australian taxes?

[WITAXLADY]

well - there is not an EIN so filing by paper..

and I will have to look - thx

D

[joanmcq]

Put the foreign wages on the FECWK! You don’t need to paper file