I posted this question in a previous question, but have decided to post it as a new question as it seems pertinent and important.
First, let me cover what I already know.
From my research on this community forum, I understand that there are two ways to input a foreign income on Turbo Tax Online:
Option 1 is:
- Income-> T-Slips -> Foreign Income - > Enter new foreign income.
Here, you can enter a foreign income, with options for other pension income and foreign investment income.
There are spaces to provide other pension and foreign investment income exempt under tax treaty, but **there is NO space provided for foreign employment income exempt under tax treaty**.
Option 2 is:
- Income -> Employment Status -> Employment Status Profile -> Check "Received tips, gratuities, occasional earnings, or other employment income" then continue, and input your foreign income under "Other Employment Income".
It seems this is the equivalent to Line 10400 (Other employment income). But, **this option also does not provide a space to input deductibles equivalent to Line 25600 on physical tax returns**.
My point is, neither option provides tax filers a place to input **Foreign Employment Income Exempt Under Tax Treaty** or a space equivalent to Line 25600 (Additional deductions) on the physical tax returns.
I have spent **hours** looking for an answer, and have scoured through this entire community looking for answers. Most answers from Turbo Tax Moderators link to an article called "How do I enter foreign income that is subject to a tax treaty?" (<-this is the link). This link **does not work**. All other links provide no concrete details on **how and where to input this value on TurboTax online**.
My situation is that my entire foreign income is taxed by the country I work in (which is Japan), and due to a tax treaty between Canada and Japan I am exempt from paying any taxes on my entire income made in Japan (as a factual resident of Canada). Thus, I want to file my foreign income, but not provide any details on taxes paid in Japan (as it is not necessary to specify). I then want to **input my entire foreign income value as an additional deductible** (either a tax treaty deductible or an equivalent to Line 25600).
I am starting to believe there simply is no equivalent to this in TurboTax's online platform. Please help; this seems to be an issue many people have, which has not been answered in any way.
Thank you for your time !
Well, I just spent a good 2 hours on the phone with Turbo Tax to no avail. However, I did get some helpful information that could maybe help someone else (even though it didn't work for me) so... I will share here for anyone interested.
An interesting thing you can see on Turbo Tax is a Detailed Tax Summary which shows which values the software is inputting for every Line of a paper tax filing. To see this, click the left bar menu then: Review -> Bottom Line (Tax Summaries). To the right, next to the white document and magnifying glass, you will see "Detailed Tax Summary". Clicking this will show you the Lines as ordered on paper Income Tax Returns. Scroll down to 25600 Additional Deductions. This is where we want our foreign income exempt under a tax treaty to appear.
Now, the two ways I described to input foreign income both set the foreign income as Line 10400 which is great. The second method is through Income -> Other Income Sources -> Income not reported on a T-Slip and clicking "Received tips, gratuities ...." then pressing Continue. However, don't do this method. Instead, follow the first method: Income -> T-Slips -> Foreign Income. Then click Enter a Foreign Income and complete the foreign slip with foreign income under "Foreign Employment Income". This is where you'll clearly notice that there is **no space to input foreign employment income exempt under a tax treaty** !! How strange...! TurboTax ????
That's ok, let's try something else. After completing and pressing continue, click the left menu bar and click: Deductions -> Payment Profile -> Foreign Tax Credit. Since you input a foreign income, there should already be an entry for the country of your foreign income. Click edit and scroll down... oh ? What's that ? A box that says "Deductions from foreign employment income" ? Ok.. maybe that will work. If you are trying to exempt your entire foreign income, input the entirety of it again here. After pressing continue, find your way back to the "Detailed Tax Summary" through Review->Bottom Line and see if this number is now reflected under Line 25600 Additional Deductions.
Now after reading through all of this and trying, chances are you're ripping your hair out. Well keep ripping ! Even after all of this, the value in Line 25600 would not change. Eventually, the TurboTax agent, who might I add was very kind and as helpful as she could be, told me to call the CRA to confirm that I was actually entitled to this tax treaty which... well, would be useless to what I needed help with but... ok, I tried. And yes, they couldn't help me because its the government.
All this to say, I truly think there is absolutely no way on the online (or perhaps only free online) platform to input a foreign income that is exempt under a tax treaty. So, TurboTax, what's up ? I am at wit's end and don't know what to do. I will most likely use an alternative online filing platform since this has caused so much grief and there seems to be no answer. It seems like a major oversight and also something that is actively being half-answered online.
I hope you are able to provide me, or anyone trying to do this same filing type, with answers as to how to do this on your somewhat disappointingly unclear software. Thank you for any help you can provide !!
Hello Adrian,
I don't expect you are still accessing the turbtax community forum, but -- if you are -- I was wondering if you found another online tax software that allows input of foreign income exempt under a tax treaty?
Sharon
You can use the Foreign Slip to report the foreign employment income.
Then use the "other deductions" to report the exempted portion:
you can access this from the search engine on the top bar or from the left side menu --> deductions --> other deductions --> miscellaneous --> continue to the next page "Additional deductions"
Use the "other" box and add a description such as "exempted foreign employment income under a tax treaty"
You should be able to see the amount on line 25600
I hope this was helpful
I have tax exempt income from an inherited Roth IRA and it is impossible to input it without tax being owed on it. I will be forced to either hire a tax accountant or try to do a paper return myself. Come on Turbo tax fix this problem!
For me it showed up in the Bottom line detailed view as Taxable income field 25600 (Additiona deductions) after I filled the filed in "Income > T-Slips > Foreign Income > New Foreign Income > Investment income exempt under a tax treaty".
Not sure how this relates with the Employment Foreign Income Exemption as the field says Investment, but the outcome on the Bottom line seems to be the same, the problem seems the field's label is misleading.
Thank you. I think I figured it out last year. I made notes on how to do it...now i just need to find my notes LOL
I will keep what you wrote to help me figure it out again this year.
Hi
I am trying to enter self employment income earned in Japan and can not figure out how to do this so that the withholding tax shows up in the correct category.
Would love it if you had any tips to share.
Thanks!
Are you asking if you can claim a foreign tax credit so that you do not get double taxes on your foreign tax?
We suggest that you contact the CRA for clarification at 1-800-959-8281.
Thank you for choosing TurboTax.
Hi
I am not asking IF I can claim the withholding tax. I know that I have confirmed that I can.
My question is about where/how to input this in TurboTax.
Thanks
To get the Foreign Tax Credit (FTC) for the foreign tax you paid, you would enter your income & taxes paid on the foreign slip. This will transfer the information to the FTC page.
To enter an amount on Line 25600, go to the second page of Miscellaneous deductions and enter the amount as "Other".
It looks good, but I do not see it in report for 2022. Probably it was not there. Could you suggest a solution for 2022 report? Thank you!
Update. I had a call with the TT experts today, looks like the feature doesn't work with reports in Quebec province. It wasn't possible to add foreign employment and foreign business income exempt under treaty to the line 25600. Could you correct this, Turbotax?
Regardless of which province of Canada you live in, if you are reporting Foreign income, You will enter it under foreign income- then go to the top right and click on FInd- type in Foreign tax credit. If the foreign country has a tax treaty with Canada, this is where you will enter the information on this sheet.
Thank you for choosing TurboTax.
Dear Brenda, thank you for your response. It is not the case for 2022 report for Quebec. The treaty is with Ukraine. There is a field to input "Treaty exempt pension", "Treaty exempt investment", but it is not possible to input "Treaty exempt foreign employment" and "Treaty exempt foreign business income", which shall take the values to the line 25600. Maybe it has changed in 2023, but for 2022 it's a gap. If I were on the development team, I would allow the clients to make inputs into the proper lines manually. That would solve the problem.