1040 Doe Case Study: Data Entry

Doe Case Study Facts: Introduction

This page is used to provide help when you are not sure where to enter data. You do not need this page if you know where all the information belongs.

Forms are accessed from the Forms List window at the left of the screen. Make sure Organizer is selected.

General Information

Review the entered data and input remaining amounts through the Organizer.
Click the Organizer tab to display a list of all the data entry forms.

Foreign Financial Account

To report the foreign country where the Does have a bank account:

Select General Information > Return and Print Options.
Click the Tax Form Options tab at the top of the Forms window.
Scroll down to the Schedule B-Interest and Dividends box.
Enter United Kingdom as the name of the foreign country.

Interest Income

Select Quick Track > 1099-INT Interest.

OR

Select Income > Interest Income > 1099-INT.
Enter U.S. interest income of $10,000, and Foreign interest income of $5,000.

Schedule C

Income

Select Quick Track > Business Income.

OR

Select Income > Business Income > Doe Consulting > Business Information.
Be sure that the Taxpayer radio button is selected in the Ownership box.
Verify the business code and name.
Select the Sch C Miscellaneous Info tab and scroll down to the Section 911 income box.
Select Automatic Allocation.
Enter 1.00 in the Foreign earned income field (1.00 = 100%).

Receipts and Expenses

Click the Sch C Inc/Exp tab at the top of the Forms window.
Select the Total gross receipts or sales field.
Enter consulting fees of $75,000.
Click Previous.
Scroll down to Other Expenses.
Select the Other Expenses field.
Enter the description Expenses Subject to Scale down and $25,000.

Form 2555

Since Mary Doe did not have income, you only need to file one Form 2555.

Select Foreign Information > Foreign Earned Income.
Add a new employer: RLC.
Enter 1 for the set number.
Verify that TAXPAYER is selected.
Go to the Employee Information box.
Enter London as the foreign address.
Go to the Employer Information box.
Enter 2395 Midway Road, Carrollton, TX 75006 in the U.S. Address field.
Check U.S. Company in the Employer box to designate RLC as a US company.
Scroll down to the Print Options box.
Check the PRINT AUTOMATIC EXTENSION statement.

Physical Presence Test Information

Under RLC, select Physical Presence.
Enter United Kingdom as the Principal country of employment.
Under RLC, select Travel Days.
On the first line, select United Kingdom.
Enter the first set of dates.
On the second line, select United States.
Verify that United States populates in the country field.
Enter the second set of dates.
Enter 10 for the business days in US.
On the third line, select United Kingdom.
Enter the third set of dates.
Enter X to print Continues.

Do not enter the date departed; this will indicate that John Doe remains in the United Kingdom.
The Tax Application will compute the §911 exclusion amount according to your specifications.

Exclusions and/or Deductions

Under RLC, select Exclusion and/or Deduction.
Scroll down to the Foreign Housing Cost Exclusion/Deduction box.
Enter foreign housing costs in the Total Foreign Housing Cost data entry field.

Foreign Earned Compensation

Select Foreign Information > Foreign Earned Income > RLC > Foreign Earned Income > Add new Allocation Period.
Enter 2019.
Click OK.

Wage Information

Select Source Documents (W-2, 1099s, 1098) > (W-2).
Enter RLC.
Click OK.
Enter the value in the right column of the Employer Allocation Period grid in the Match W-2 with Employer Allocation Period field.
Select the hyperlink for Foreign Earned Income.
Enter Base salaries.

Since John Doe’s wages are foreign source during foreign assignment, do not change the Allocation Method.
Select the back button to return to the W-2 tab.
Enter the information from John Doe’s -2 from RLC, his employer.

Noncash Remuneration Information

Allocation of Income to US

Select the hyperlink for Foreign Earned Income.
In the Noncash Income box, select Income earned while on foreign assignment and allocated to days worked in U.S. as the allocation method for Home (lodging) and Car.
Enter $18,000 for Home (lodging) and $5,000 for Car.
Scroll down to the Allowances or Reimbursements box.
Select Income earned while on foreign assignment and allocated to days worked in U.S. as the allocation method for Cost of living and overseas differential and Education.
Enter $15,904 for the Cost of living and overseas differential.
Enter $12,000 for Education.

Tax Equalization

Scroll all the way down to the Other Foreign Earned Income box.
Select Foreign Source During Foreign Assignment (Default) as the allocation method.
Enter Tax Equalization as the description, and $29,500 as the amount.

Deductible Taxes

Select Itemized Deductions > Taxes and Interest.
Select Taxes - Other.
Under Real Estate taxes paid, enter $20,000 for Real Estate Taxes Paid (US property).
Under Personal Property Tax, enter $1,400 for Personal property taxes (US property).

Form 1116 - Foreign Tax Credit

This area contains topics that apply to Forms 1116 in the return such as information related to a specific income type and country and special treaty options.

Select Foreign Information > Foreign Tax Credit > Foreign Tax Credit Options.
Enter United Kingdom as the Country of residence (if not USA).
Scroll down to the Code To Allocate Foreign Taxes To Exclude Section 911 Income box.
Select Foreign Assignment (both US and Foreign) income earned in the current prior and future year from the Taxpayer radio button.
Go to the Adjust/Override Allocation Ratio box.
Enter the adjustment in the Increase/decrease numerator of allocation ratio data entry field.
Make sure your adjustment is in the Taxpayer column.

Passive Income

Select Foreign Information > Foreign Tax Credit > Add New Foreign Country.
Enter United Kingdom.
Click OK.
Select United Kingdom as the Country Name.
Verify that the Taxpayer radio button is selected.
Select Passive Income from the Foreign Income Type list box.
Enter 12/31/2019 for the date foreign tax was paid or accrued.
Enter $5,000 in the Interest data entry field.

You can enter decimal amounts for the Foreign Source Income numbers that are not overrides to allocate a percentage of the foreign source income from Form 2555.
Select the Taxes Paid/Accrued tab.
Enter T in the left column to allocate taxes based on the taxpayer’s ratio.
Enter 590 in the Interest data entry field.
Do not make any selections or entries in the Conversion Rate box.

Other Wages

Select Add New Foreign Country.
Enter United Kingdom.
Click OK. You should now have two United Kingdom folders under Foreign Tax Credit.
Select United Kingdom as the country name.
Verify that the TAXPAYER radio button is selected.
Select General category income as the Foreign Income Type.
Enter 12/31/2019 as the date the foreign tax was paid or accrued.
Select the Taxes Paid/Accrued tab.
Enter T in the left column to allocate taxes based on the taxpayer’s ratio.
Enter $5,600 for tax paid in the Wages/Other field.

Since the tax paid is given in pounds (.6 British pounds to one (1) US dollar), it needs to be converted.
Enter X in the Use Conversion Rate as a Divisor column.
Enter .60 as the conversion rate.
Leave the US dollar amount field blank.

IRS Service Center

Select Letters and Filing Instructions > General Options.
Verify that the IRS Service Center is Austin-International.
Confirm that the IRS Service Center (Override) is selected to Automatic Generation.

Case Study Facts/doe_data_entry.htm/TY2019

Last Modified: 03/19/2020

Last System Build: 06/17/2021