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Does anyone know how do I calculate my accrued Japanese taxes from a US Form 1116 perspective? Or general guidelines that apply to most major countries? How would a CPA actually know to figure this out? Does the IRS publish a list somewhere?

  • Taxable Income (源泉徴収税額)
  • Inhabitants Taxes (住民税)
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I'm not familiar with the Japanese taxes specifically, but the IRS does publish general guidelines as to what taxes qualify. The full publication is here.

Generally, the following four tests must be met for any foreign tax to qualify for the credit:

  • The tax must be imposed on you
  • You must have paid or accrued the tax
  • The tax must be the legal and actual foreign tax liability
  • The tax must be an income tax (or a tax in lieu of an income tax)

So for example, property taxes or sales taxes would not qualify.

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If you are a cash-basis US taxpayer and your financial year is January 1 through December 31 (most US taxpayers satisfy these conditions), then for the purpose of Form 1116 for Year X, the foreign income tax that you paid for Year X is the total of

  • income tax withheld from your foreign wages or other foreign income during Year X

plus

  • any income tax paid during Year X as estimated tax payments,

plus

  • any income tax paid during Year X with the final tax return for previous years' income taxes,

minus

  • any refunds of income tax received during Year X.

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