Filing Form 1116 – Foreign Tax Credit Explained

[jaywave 2]

Me (US citizen)

Spouse (Permanent Resident)
 

My wife and I are planning to file jointly (MFJ), but I’m worried about doing our taxes correctly.

In 2024, my wife was in the U.S. from April to May (1 month) and again from July to October. She then returned to Korea, where she worked from November to December and paid taxes on her income there. Also, she didn't work in the US and made zero income in the US. As for me, I'm currently living and working in the US.

From my research, she does not qualify for Form 2555 (Foreign Earned Income Exclusion) because she spent about 3–4 months in the U.S., which does not meet the physical presence test. However, I read that she might be able to file Form 1116 (Foreign Tax Credit) to claim a credit for the taxes she paid in Korea.
 

My question is: Should she file Form 1116? I’m trying to use TurboTax, but the process is confusing.

If anyone has any better suggestions, please reply.

Thank you.

[OldUser 7,873]

US LPR is a always a tax resident for the purposes of IRS.

 

Why is the spending so much time outside of the US? Does she have reentry permit? She may lose GC if she doesn't have reentry permit or loses ties to the US.

Edited Monday at 04:17 AM by OldUser

[JeanneAdil 6,693]

What is the difference between form 1116 and 2555?

 

 

For example, if your foreign earned income is $120,900, you can only exclude foreign earned income up to $112,000 on the Form 2555 which will reduce your taxable income on the return. The remaining foreign earned income may be used on Form 1116.

 

 

you have to meet individuals must meet either the bona fide residence test or the physical presence test, and have a tax home in a foreign country.

 

you need a tax preparer to talk to about your absense from USA to know how to proceed /forget turbo tax as it does not explain or know your circustances as LPR

[JKLSemicolon 433]

Read the detailed instructions for the FEIE here, especially the Physical Presence Test section:

 

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

 

In particular, this part may still apply:

 

You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during any period of 12 consecutive months including some part of the year at issue. The 330 qualifying days do not have to be consecutive.

 

Also of note:

Full day

A full day is a period of 24 consecutive hours, beginning and ending at midnight. You must spend the full day in a foreign country or countries for that day to be counted. When you leave the United States to go to a foreign country or when you return to the United States from a foreign country, the time you spend on or over international waters does not count as time in a foreign country.

 

I would recommend making a spreadsheet of the date ranges she was in the US versus out and seeing if there is a 12-month period that meets that criterion for you. That’s what we did when using the FEIE.

[jaywave 2]

22 hours ago, OldUser said:

Why is the spending so much time outside of the US? Does she have reentry permit? She may lose GC if she doesn't have reentry permit or loses ties to the US.

She doesn't have a reentry permit, but she has been outside the US for over 6 months, but less than 1 year. She has a drivers license in the state we live in, bank, etc. From what I read in the cbp website, as long as my spouse is not gone for more than 1 year, she will be fine.

 

 

8 hours ago, JKLSemicolon said:

Read the detailed instructions for the FEIE here, especially the Physical Presence Test section:

 

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

 

In particular, this part may still apply:

 

You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during any period of 12 consecutive months including some part of the year at issue. The 330 qualifying days do not have to be consecutive.

 

Also of note:

Full day

A full day is a period of 24 consecutive hours, beginning and ending at midnight. You must spend the full day in a foreign country or countries for that day to be counted. When you leave the United States to go to a foreign country or when you return to the United States from a foreign country, the time you spend on or over international waters does not count as time in a foreign country.

 

I would recommend making a spreadsheet of the date ranges she was in the US versus out and seeing if there is a 12-month period that meets that criterion for you. That’s what we did when using the FEIE

But I'm not sure if my spouse will meet this requirement. Because she will have to start from May 2, 2024 to May 2, 2025. The issue with the meeting the physical presence test is that she was in the US from July to October, 2024 (68 days). Is it even possible she can meet the physical presence test?

[JKLSemicolon 433]

1 hour ago, jaywave said:

She doesn't have a reentry permit, but she has been outside the US for over 6 months, but less than 1 year. She has a drivers license in the state we live in, bank, etc. From what I read in the cbp website, as long as my spouse is not gone for more than 1 year, she will be fine.

 

 

But I'm not sure if my spouse will meet this requirement. Because she will have to start from May 2, 2024 to May 2, 2025. The issue with the meeting the physical presence test is that she was in the US from July to October, 2024 (68 days). Is it even possible she can meet the physical presence test?

It’s hard to answer your question because we don’t have all the information. I don’t know the significance of the May 2 date you picked. We’re talking about the 2024 tax return, right?

 

To give you a definitive answer you’ll need to list all the dates she was in the US for 2023 and 2024 (assuming we’re talking the 2024 tax return).