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Learning The Mechanics Of A Foreign Tax Credit!

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  1. UnknownDecember 5, 2014 at 3:38 PM

    I believe you can only claim the foreign credit for taxes paid to countries that have a tax treaty with the US. On the other hand claiming the FTC usually triggers the AMT.
    Based on your experience what is the best way to prove the withholding?

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    1. Manasa Nadig, The Buzz About TaxesDecember 8, 2014 at 4:13 PM

      Hello Alfredo, thanks for your comment.
      There are restrictions for certain countries but this is not based on whether they have treaties with the US or not. FTC can be claimed for taxes paid to any foreign country NOT on the list of sanctioned countries, as long as other conditions are fulfilled. Refer IRC § 901 and Pub 514.
      FTC might trigger Alternative Minimum Tax (AMT) but it is not the only factor that does nor does it always do so. There are several other reasons a taxpayer may become liable for AMT.
      The withholding proof that I generally use are proofs of tax deducted at source statements from banks or other financial institutions on their official letterheads, or actual tax returns filed in foreign countries. There are sometimes other receipts that might also be acceptable, it depends on the situation.

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  2. AnonymousJanuary 7, 2022 at 7:16 AM

    This comment has been removed by a blog administrator.

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