What Form 8865 Treaty 2023-2024

In this YouTube video, we will discuss what to do when you receive a tax document such as a 1099 div or 1099 int that shows foreign taxes paid on the income earned. For example, you received a form 1099 div that shows you earned four thousand dollars of dividend income. The income earned is shown in line six of the form, which shows $1,200 of foreign taxes were withheld and paid. Line seven identifies the foreign country, in our example, Australia. Generally, you may claim a foreign tax credit on your U.S. individual tax return for withholding taxes imposed on the dividend income, but only to the extent you are legally liable for that tax. The withholding tax rate is based on the internal tax law of the foreign country, unless a tax treaty between the United States and that foreign country establishes a different withholding rate. Many countries have tax treaties with the United States. Depending on the treaty, eligible residents or citizens of the United States may be taxed at a reduced rate or be totally exempt from certain foreign taxes on various types of income earned in these foreign countries. Many tax treaties establish reduced tax rates for dividend and interest income. By the way, when we say "foreign tax paid," as in line six of the form 1099 div, it means the tax was withheld and then paid over to the foreign country, or a withholding tax. So, how much of the $1200 foreign tax paid in the example are you legally liable for and able to claim as a foreign tax credit? In order to answer that question, you need to first determine if the amount of foreign tax shown in line six is the appropriate amount of withholding tax imposed on the dividends earned in that foreign...