# UK expat in US Foreign tax credit



## LFCJudge (Mar 16, 2015)

Hi

Looking for some help with Foreign Taxes paid form 1116.

I am from UK but working in US since 2010 on L1 visa. My payroll is handled through employers US subsidiary and I file both US and UK tax returns.

I sold some stock options in 2012 and 2013 (that were awarded to me before I moved to US in 2010) and these were accounted through and reported on my 2012 W-2 with taxes deducted from proceeds accordingly by my US payroll.

However in my subsequent UK tax return, I had to then pay tax again on the same sales proceeds relating to proportion of the gain for the period I was resident in the UK prior to my move to the US :
•e.g. options awarded in 2008
•move to US 2010 
•options sold 2012
•US tax on full sale proceeds 2012 W-2
•UK tax paid proportionally on sale proceeds for period 2008 -> 2010 when still resident in UK

I understand that I can reclaim this using form 1116 Foreign Tax Credit but I am unclear whether should reclaim using amended 2012 return (based on when I sold the shares and was taxed in US in 2012) or on my current 2014 return (as I paid the 'double tax' in UK during 2014)?

any advice is appreciated
thanks


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## BBCWatcher (Dec 28, 2012)

I think you have the choice, as you prefer. The FTC is not a refundable tax credit, so you need enough U.S. income tax _in the same income category_ to offset in order to get its benefit. That was certainly true for you in tax year 2012, so that'd work via an amended return. (The FTC can be applied up to one tax year backward, in the current tax year, or up to 10 tax years forward. I'm assuming you incurred the U.K. income tax in calendar year 2013 or earlier so that you can roll it back to U.S. tax year 2012 if you wish. Or, if incurred in 2014, you could roll back to tax year 2013.) But if it's also true in tax year 2014, that'd work.

_Generally_ you're better off "spending" your FTCs as early as possible, as far back in time as you can, so that you have the maximum flexibility to "spend" current and future FTCs that you accumulate. Once the FTC "window" moves forward you can't move it back again, if that makes sense.


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## Bevdeforges (Nov 16, 2007)

There are a couple different ways to handle this, but the "simplest" is to claim the foreign taxes back in the year in which you actually paid them. (The calendar year, not necessarily the UK tax year.)

So, if you paid the UK tax on the sale of the options sold in 2012 in, say, October of 2012 - you would need to file an amended 2012 return to reclaim the taxes paid to the UK against whatever you paid in US taxes for 2012. If you didn't pay the taxes to the UK until March, 2013, then it's the 2013 US returns you should amend. 

If you actually paid the tax on the sale in calendar 2014, then you can claim back your tax credit on the 2014 return you'll be filing currently.
Cheers,
Bev


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