Form 1040: tax owing?

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Form 1040: tax owing?


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Old 17th February 2020, 08:55 PM
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Default Form 1040: tax owing?

I am currently filling out Form 1040. In the past, my total income has been below the Standard Deduction, so the amount owing was always zero, and easily calculated that way.

However, this year that changed. My total income is slightly above the Standard Deduction, by $935. According to the Tax Table (Married filing separately), that means I owe $94. But that shouldn't be the case, since I am paying income taxes in Canada.

I haven't filled out Schedule 1 yet. But I'm guessing that, because my total income will be reported on Line 9 as a negative amount (courtesy of Form 2555), when I enter that on Line 7a of Form 1040 and subtract that negative amount from my total income, the amount will be zero, entered on Line 7b. Correct?

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Old 17th February 2020, 09:35 PM
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It depends on your sources of income, but if your FEIE amount (from form 2555) is greater than your earned income then you will owe no taxes. Just follow the instructions for the lines you mentioned.

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Old 17th February 2020, 09:55 PM
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It depends on your sources of income, but if your FEIE amount (from form 2555) is greater than your earned income then you will owe no taxes. Just follow the instructions for the lines you mentioned.
Thanks Bev, it is. The maximum foreign earned income exclusion is $105,900. My income (wages plus a small interest income, all of which I reported on Form 2555) is $13,135 USD.

So, on Line 8 of Schedule 1, I entered (13135) Form 2555. Then, in the column for Lines 8 and 9, I entered -13135.

Going back to Form 1040, I entered -13135 on Line 7a, then entered 0 in Lines 7b, 8b and 11b. Correct?

I guess I should fill out all the forms before asking!

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Old 18th February 2020, 02:03 AM
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Not quite right.

Income from interest cannot be excluded - you can only exclude earned income (fundamentally wages)

Wages on line 1.
Interest on Line 2
FEIE on line 7 (your wages as as a negative)

That will leave you with an AGI equal to the interest you recieved.

Which would be offset by the standard deduction on line 9

Leaving you with a taxable income of zero on line 11
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Old 18th February 2020, 06:39 AM
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What Moulard said. With an added caveat that your interest income should NOT be included on your form 2555.

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Old 18th February 2020, 12:22 PM
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Quote:
Originally Posted by Moulard View Post
Not quite right.

Income from interest cannot be excluded - you can only exclude earned income (fundamentally wages)

Wages on line 1.
Interest on Line 2
FEIE on line 7 (your wages as as a negative)

That will leave you with an AGI equal to the interest you recieved.

Which would be offset by the standard deduction on line 9

Leaving you with a taxable income of zero on line 11
What is AGI? Annual Gross Income? (Abbreviations and I do not get along.)

Thanks to you and Bev for this! So that means I did this incorrectly last year (I included the interest on Form 2555). But I guess because it was such a small amount, and my total income was below the standard deduction, they didn't bother correcting me on it.

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Old 18th February 2020, 01:01 PM
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What is AGI? Annual Gross Income? (Abbreviations and I do not get along.)
Now I see; AGI = Adjusted Gross Income.

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Old 18th February 2020, 01:29 PM
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Quote:
Originally Posted by byline View Post
What is AGI? Annual Gross Income? (Abbreviations and I do not get along.)

Thanks to you and Bev for this! So that means I did this incorrectly last year (I included the interest on Form 2555). But I guess because it was such a small amount, and my total income was below the standard deduction, they didn't bother correcting me on it.
Actually, right conclusion for the wrong reason. The net result of including your interest income on your 2555 form does not change your tax liability in the slightest. That's the real reason they don't bother to "correct" your error.

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Old 18th February 2020, 10:11 PM
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Actually, right conclusion for the wrong reason. The net result of including your interest income on your 2555 form does not change your tax liability in the slightest. That's the real reason they don't bother to "correct" your error.
Fair enough. I think you are exactly right!

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Old 18th February 2020, 11:29 PM
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If you reported it as wages and excluded it as wages, they would have no means to know that there was an error in the first place.

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