I had international work in 2 countries and my company paid the income taxes directly to those countries for me and is paying a tax service to do my US taxes.

The duration of work was not sufficient to have any wages counted as foreign income (for US Tax purposes)

I believe the taxes paid by my company to these other countries should be converted to USD and included in my W-2 as 'other income'. If it is not included then the tax preparer cannot logically include a deduction for foreign taxes paid.

To me this seems logical, but in my experience accounting and taxes are not always as straight forward. I am just looking for clarification of the treatment of the foreign taxes as income or not.

Thanks!
Jon

#1;Then, you can claim the expense on Sch A of 1040 as long as you itemize deductions on your return; if not, you can’t claim the expenses. The only way to take advantage of the tax preparation deduction is to file itemized tax return.


#2;as mentioned above, then, the tax person needs to make sure that he does include the amount for tax preparation on the appropriate line when preparing the taxes. You, as a Taxpayer, who incurs fees from tax preparation can deduct those fees. The amount of the deduction may be small; however, that small deduction can move you down one or two tax brackets and thus save money

#1 & #2 were not a concern, but thanks for the clarification (They did not include tax prep services (paid by the Company) as other income either ...)

#3: I am just looking for clarification of the treatment of the foreign taxes as income or not.

- Jon

NOT as income; in genral, you have a choice as to whether you deduct any foreign taxes paid or accrued during the year as an itemized deduction on your Form 1040 Sch A on line 7 as other taxes, I guess, or as a credit using Form 1116 nd report in on 1040 line 47 I guess.. The choice needs to be made each year that you have foreign taxes and it can change from year to year. While you can choose whether to use a credit or a deduction year to year, you can't use some as a credit and some as a deduction in the same year. The IRS recommends filling out your taxes both ways to see which one provides you with the most benefit

Like I said - taxes and accounting sometimes are confusing to me ...

So to clarify with a very simple hypothetical situation. Say I earn 6k/month, and my company paid 5k in taxes to a foreign country. My filing would be:
1040 line 7 = 72,000
1040 lines 8-21 = 0 (no other income to make situation simple)
1040 line 22 = 72,000
1040 lines 23-36 = 0
1040 line 37 = 72,000 AGI
Standard deduction -5,800
taxable income 66,200
Taxes from table 12,600
Foreign Tax Credit 4,000 <- I can take credit for foreign taxes even
though I did not logically or physically pay
them .. +1,000 carry to over to the next year
Taxes due 8,600
Taxes withheld 13,600
Refund 5,000 <- My company paid my foreign taxes, and the
IRS gives this to me - what a deal!

So, as a hypothetical situation, I make out well ?!?

- JD