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Discussion Starter · #1 ·
I am an American citizen that has been living outside the US for the last 15 years. I was in Europe most of these years so that between the Foreign-Income Exclusion and the Foreign Tax Credit I did not have to pay any taxes to the US.

Two years ago I accepted a new job in Singapore and suddenly my salary became much higher and my local tax rate much lower. As a consequence last year I started to also pay the American taxes. I will not speak about the frustrations trying to deal with such a complicated tax code.
Anyways, this year I realized that I could carry forward some of the unused foreign-tax credit of previous years to compensate for some of the current taxes.

First question:
since I am filing for 2014 (I know I missed the April deadline) and I know I can go back 10 years, can I also use the foreign tax credit for year 2004 or I can only use those for 2005 on?

Second question:
For some of the previous years the foreign-income exclusion was enough to offset my taxes and I did not file form 1116. Is it possible to claim the foreign-tax credit anyway for those years? How do I do that?

Sincerely,
LadyOscar

PS
I have few more questions but I'll make another post about them
 

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The FTC lets you go back one year and go forward up to 10 years. But it used to be back 2 years and forward 5 years. Please check the rules carefully on that to see when you can spend those very old excess FTCs.

Fortunately there's no particular rush. Assuming the excess FTCs are still spendable, those rules simply apply to which tax year(s) you can spend that excess. You can file amended tax returns any time you wish (and you've still got about a month to sort out your 2014 U.S. tax return), and refunds are collectable as long as you're filing that amended return no later than 3 years after the original due date. You don't have a 10 year (or 5 year) limit on a filing deadline for these purposes -- they're two separate concepts.

You may also want to investigate whether you're allowed to flip your tax returns (by filing amended tax returns) during some of your European working history from taking the Foreign Earned Income Exclusion to taking only the Foreign Tax Credit in order to boost your excess FTCs. Maybe you cannot alter that past decision, but it's worth checking.

Complicated, perhaps, but all in your favor. The U.S. government is going to end up paying the difference between your higher European tax rates and the U.S. rates. That's a great deal, so congratulations.
 

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The U.S. government is going to end up paying the difference between your higher European tax rates and the U.S. rates. That's a great deal, so congratulations.
While not directly relevant to OP's question, this is a public forum and I don't want to leave unchallenged these adulatory comments about the U.S. tax treatment of expats.

In this scenario, the U.S. government is not going to end up "paying" for anything; they will simply reduce their claim on the foreign income of someone who hasn't lived in the U.S. for 15 years, a claim that no other country would even make in the first place. So I'm not sure in what sense this is supposed to be a "great deal". Assuming the FTC's won't cover OP's entire future U.S. tax liability in Singapore, it is an objectively worse deal than OP would be getting from any other country in the world.

Though it is indeed true that being able to carry forward FTC's is better than not being able to carry forward FTC's.
 

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You are forgetting the fact that US citizenship is supposedly so precious compared to any other citizenship that it is worth paying for it year after year even if you don't live there. At least that's the argument some use to justify US CBT. You get it; others, not so much.
 

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In this scenario, the U.S. government is not going to end up "paying" for anything....
Wrong, or at least overstated. The excess Foreign Tax Credits can be applied to U.S. income tax liabilities on income (in the same income category) regardless of whether the income is U.S. or foreign source.

Living and working in Singapore (or Europe) does not necessarily (or even frequently) mean you have zero U.S. source income. I live and work in Singapore, and I have a fair bit of U.S. source, taxable income. If I had excess FTCs to spend down, I could offset U.S. income tax on my U.S. source income. Ladyoscar has that option.

This really is a great deal, at least for a while.
 

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At least we agree that it's not necessarily a great deal unless OP has U.S. source income.

But even if someone has US source income, the total foreign tax credit is limited to their US tax liability multiplied by the proportion of their income which is foreign source income. So if a person has x dollars of foreign income and y dollars of US income and the US tax rate on x+y dollars is p, they will still owe at least p*y dollars no matter what the foreign tax rate is or how many foreign tax credits they have stockpiled.

On the other hand, if the US taxed foreign income like every other country does (i.e. did not tax foreign residents on their foreign income), then the person would only owe q*y dollars in U.S. tax, where q is the US tax rate for y dollars.

Since the tax rate rate for y dollars is usually less than the tax rate for x+y dollars (i.e. q < p), the person is still worse off then they would be without CBT..

Please explain if I am misunderstanding something or if you have some other scenario in mind.
 

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Discussion Starter · #7 ·
...

You may also want to investigate whether you're allowed to flip your tax returns (by filing amended tax returns) during some of your European working history from taking the Foreign Earned Income Exclusion to taking only the Foreign Tax Credit in order to boost your excess FTCs. Maybe you cannot alter that past decision, but it's worth checking.

...
Thanks a lot, thi answer was very useful. I tried to compute how much I would get if I could amend all those FEIE taken during the last ten year: it's a lot of money.

Now I have a lot of homework to do, but I am very hopeful.

Sincerely,
LadyOscar
 
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