Turbotax Foreign Income - On the 2555?

I'm so confused!
I moved to the UK in early August of '07, and had a job in the US until arriving here. I've earned about as much here in the UK as I did in the US (let's say $30,000 in each place.) I put in the W-2 data for my US job, and completed the 2555 (I know I need to wait until I've been here 330 days until I file) and it's telling me I get all the US taxes I paid back- like $5,000. Line 21 on the 1040 is a very large negative number. That doesn't make sense to me - does the foreign income need to be entered anywhere else than on the 2555? Like in the W-2 section?

1040 page 1 line 7 just shows the income I made in the US.
2555 page 2 line 19 shows the correct amount of money I made in the UK for 2007.

I also didn't see where I put in how much taxes I paid in the UK anywhere (in case that matters!) I did not make more than the exclusion this year, but will make more than the standard exclusion amount next year. Does anyone have any suggestions? Could this be similar to the other post about a possible TurboTax problem?

Thanks! -Matt.

Line 7 should show your US wages AND your UK wages.
Then the big negative amount goes on line 21.
The net number is your US source income.

There is a flaw in Turbotax this year having to do with exactly this problem.  You should contact Turbotax and let them know.  They should have a fix or patch for you.

If you do find the fix or patch, please post what you find out. I haven't started my taxes yet, but I plan on using TurboTax as I like that program and it's what I used last year, so it will import the info from last year's taxes.

Just for the record, I'm a total bum. There's nothing wrong with Turbotax really - just how I was interpreting things. In the walk-through, it asks about W-2's and I mistakenly thought it was only referring to US income. Stupidly enough, it's referring to UK income as well. That's why it looked like I was going to get a great deduction! Hope this helps other people out and I apologise if I've created any confusion!

-Matt.

DH just bought TurboTax and had a problem at first where it said we were getting a refund of over 18K due to the same issue! BUT, there was a box in the income area he had to check and now we owe $2500 so it definitely corrected something. It was something he missed the 1st time around though. I'll have to ask him which specific box it was. We did not contact turbo tax though so they've done something to fix this or that box was always there and people are just missing it. Not sure which.

I am having this same problem with TurboTax and cannot figure out how to get my UK wages to show up on Line 7.  I've emailed TurboTax support twice already and they tell me Line 7 is for W2 only (obviously incorrect).  I'm emailing a third time, but in the meantime, can anyone tell me how I can enter my UK wages correctly?  I have no W2 income so I'm unable to fill out that section.

I used the online turbo tax, I entered my UK income under the W2 section, you can click foreign address for the employers address, and then just fill in income, then it will ask you more information after you have entered it.  Took me ages to figure it all out! 

it does go into the W2 section my dh says (i think similar to scbrit)

I did my Turbotax a couple of weeks ago, and it seems like there is a whole section on foreign income. I honestly don't remember if I also listed the income under W2 (I think it put it as income for which I didn't have a W2, and later listed it in foreign income). It was a bit complex because we had an overseas move, U.S. income, UK income AND some "freelance" income which requires special forms (ended up with 30 pages of tax forms to print!).

Have you tried just plowing through it, filling in blanks with what you think is right, and then seeing if any forms/questions come up later that clarify things? You can always go back and change entries, or even save one copy as it is now, then save another one with a different name as a "test" version to see if you can figure out where to put your foreign income.

Thank you all for the very helpful advice!  That did the trick--I entered our wages in the W-2 section (with employer as foreign address) and then clicked the box that said it was earned outside the US.  I left all other W-2 fields blank, since we had no federal taxes/social security/etc withheld.

Thanks again for the quick replies!

glad you got it all figured out!

I'm just going over my forms that I printed out last week, and noticed that on Form 2555 on line 8a it asks if we maintained a separate foreign residence due to adverse living conditions at our tax home. And it correctly is checked "no". However, Turbotax did deduct our living expenses here, which is great. But is that an error to deduct our living expenses as we don't have a home in the U.S.? There was nothing in answering the Turbotax questions that asked whether this was our first or second residence, so I'm confused.

I'm just going over my forms that I printed out last week, and noticed that on Form 2555 on line 8a it asks if we maintained a separate foreign residence due to adverse living conditions at our tax home. And it correctly is checked "no". However, Turbotax did deduct our living expenses here, which is great. But is that an error to deduct our living expenses as we don't have a home in the U.S.? There was nothing in answering the Turbotax questions that asked whether this was our first or second residence, so I'm confused.

No, its not conditional on having a home in the US.

Thank you all for the very helpful advice!  That did the trick--I entered our wages in the W-2 section (with employer as foreign address) and then clicked the box that said it was earned outside the US.  I left all other W-2 fields blank, since we had no federal taxes/social security/etc withheld.

Thanks again for the quick replies!

I submitted mine yesterday and found out that I didn't go through the W2 foreign income section.  This looked terrible so, I went through that scenario as well. There is no difference in the result and here's why:

If you look at 2555 before line 19, section B, there is an adjustment for the foreign income.  This line is the same as entering it above, on section A.  Section A flows into 1040 line 7 but not section B.
Now, that section B excludes the portion of the income for 85700 in the result and, using 1116, gives the necessary credit.
If one adds the foreign W2, it essentially adds to section A and to line 21 in the 1040, flowing from the 2555, line 45.  Practically, what you added gets substracted later.

I have used TurboTax for about 15 years and this is the first year outside of US.  The early release for this year was worse but, it seemed to have plugged all the gaps.  I was hoping that the flows are more seamless but, this will do for now.

In the end, I have obtained the same tax results using the W2 foreign.  So, it's your call.

My situation is with both US and UK incomes from last year, going just over 85700 but, thanks to my wife, made the cut with both exclusions.

Thanks for the posts and good luck.

Happened to me last year too. I haven't gotten an actual answer out of TurboTax yet because they decided the issue was too complicated to answer by email, and I wanted to wait to call them until after tax season when I would not face a several-hour wait on hold.

Anyway...

This is so incredibly unclear in TurboTax that I think it really does qualify as a bug.

First of all, non-U.S. employers do not issue W-2s, so TurboTax should not expect the customer to guess that they have to enter foreign income in this section. For a non-U.S. employer there is not even all the necessary information; such an employer has no federal EIN--the option to provide a foreign address is not enough.

Then, under the TurboTax income entry process, there is an option for "Foreign earned income" under the section "Other Income." You would think that this would report the income amount as well as the exclusion, but no. For my situation in 2006 TurboTax placed a negative number here.

I haven't found any "box to check" in the 2006 version that makes it include the foreign amount in the total wages and salaries.

I'm strongly inclined to think I'd be better off on my own this year.