Foreign

Forum|Forum|5 years ago
February 15, 2021
1 reply
24 views

why is the excluded foreign income added back on the foreign earned income tax worksheet?

My client worked in US and Switzerland. Her original return only reported the US wages. I am now amending to reflect the Swiss wages also. The 2555 excluded the swiss wages but on the 1040 the tax worksheet adds the income back in and the client owes $. What am I doing wrong?

Lacerte Tax

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itonewbie

Level 15

That's the stacking rule. It determines the marginal rates that are applicable to taxable income and excludes foreign earned income at the lower brackets. Similar to how some European countries exempt treaty income based on progression.

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E

eavAuthor

Level 3

So then the tax calculation is correct? What will happen for 2020 when her income is all from Switzerland? It will all be excluded then, correct? (subject to the limits that is)

itonewbie

Level 15

If there's no income other than what's been excluded under §911 or that the sum of other income does not exceed your client's adjustments/deductions, there'd be no income tax liability -- unless, of course, your client has other liabilities such as SE-tax, additional medicare tax, NIIT, §965 installment, §951A GILTI, etc.

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