5

I was a student in one of the universities in Texas before I graduated in Aug 2010 and moved back home to India. However since June 2010 till date, I have been working with a US based company.

Indian financial year runs from April - March. According to the timing of move back home, I qualify as an Indian resident to pay taxes in India on my year-round global income. I have paid that income tax in India in March 2011.

I was told that I would be able to claim foreign tax credit when I file return in US, since same income from my US based company is taxable in two countries. BUT today I was talking to a tax consultant in US who told me it is not possible to claim that foreign tax credit for year 2010 since I paid that in March 2011, whereas the US financial ends in Dec (2010). He said I can claim that for year 2011.

I would like to get his opinion confirmed from someone out here. Any ideas?

Thanks.

Dheer
  • 57,348
  • 18
  • 89
  • 170
Mandar
  • 193
  • 1
  • 5

1 Answers1

2

First: See an accountant (another one).

Second: Read what the IRS says, and dig a little deeper into the forms yourself.

Third: My understanding of:

Four tests must be met to qualify for the credit:

  1. The tax must be imposed on you

  2. You must have paid or accrued the tax

  3. The tax must be a legal and actual foreign tax liability, and

  4. The tax must be an income tax

is that you have accrued income tax liability from June 2010 until December 2010. As such, you qualify for the deduction --- but only on the portion of your Indian taxes paid during the 2010 calendar (US tax) year.

Did your employer issue you with a 1099-MSC for the 2010 US tax year? That would remove all doubt.

Peter K.
  • 3,983
  • 2
  • 27
  • 36