AMT? Or Turbotax Error

Hi all,

I'm doing my taxes this year and while I've had an increase in pay, I wasn't expecting Turbotax to say I owe about $1k to the US due to AMT. I think I've done the same thing I do every year - putting in my UK income in the Foreign Earned Income and Exclusion section and then the UK taxes I've paid Foreign Taxes section of the Deductions & Credits page.

The taxes I've paid the UK exceed what the US would have taken (if I lived and worked there) by about 30%, so I can't believe I actually owe the US anything. I thought the principle of taxes was that if you'd paid another government, it would offset anything you might owe the US. Or is that just flawed?

Many thanks!

I know nothing about TuroTax, other than it's not designed to handle international returns. Nonetheless it will work most of the time, but not all the time. This maybe one of those times. Nowhere is there any guarantee that a US person abroad will never owe the IRS, even with foreign tax paid offsetting US tax. It can occur. In the past I've had to pay AMT tax, but the rules that caused it to occur have changed.

I don't understand " .....Foreign Earned Income and Exclusion section and then the UK taxes I've paid Foreign Taxes section of the Deductions & Credits page". It may be time to ditch the FEIE (2555) and start using FTC (1116). Since you're using TurboTax, it should be easier than figuring it yourself. There is a provision in AMT to allow for foreign tax credits which pertain to AMT.

Specify FTC form 1116 for all foreign income and see what happens.

Hi all,

I'm doing my taxes this year and while I've had an increase in pay, I wasn't expecting Turbotax to say I owe about $1k to the US due to AMT. I think I've done the same thing I do every year - putting in my UK income in the Foreign Earned Income and Exclusion section and then the UK taxes I've paid Foreign Taxes section of the Deductions & Credits page.

The taxes I've paid the UK exceed what the US would have taken (if I lived and worked there) by about 30%, so I can't believe I actually owe the US anything. I thought the principle of taxes was that if you'd paid another government, it would offset anything you might owe the US. Or is that just flawed?

Many thanks!

With the US you always have to calculate taxes with and without AMT deductions and you pay the higher of the 2. AMT has a lot of deductions not allowed. Have you tried running your tax calculations without excluding your UK earned income and instead applying the UK taxes you paid as foreign tax credits?  (Form 1116). We have to do this every year because most of our income is from US pensions which cannot be excluded using FEIE, and because we pay more UK taxes on that income the US tax liability on it goes to zero.

I cross-posted with theOAP whose suggestion is along the same lines but more eloquently stated