Dual-Status Tax Year and Form 1116 - Correctly Claiming Foreign Tax Credit with a Green Card

Your approach to calculating your US-taxable foreign income is on the right track. For a dual-status year, you need to pro-rate your foreign income based on the period you were a US resident for tax purposes. For your Form 1116 Foreign Tax Credit question, the IRS is pretty clear about this. Since you're using the cash method (which is what most individual taxpayers use), you can only claim foreign taxes in the year you actually paid them. So for your 2023 US tax return, you can only claim the UK taxes that were actually withheld during 2023. The additional £3,500 you paid in April 2024 will be claimed on your 2024 US tax return (filed in 2025), even though it relates to your 2023 UK income. This is a common situation for people with foreign income. The IRS doesn't care which tax year the foreign taxes relate to - they only care when you physically paid them. Make sure to keep good records of all your foreign tax payments, including the dates paid and exchange rates used. You'll need these to complete Form 1116 accurately for both tax years.

I went through a similar nightmare last year with my Canadian income and US taxes. I started using https://taxr.ai after getting totally confused with all the form requirements for foreign income. Their AI actually explained exactly how to handle the dual-status year situation and walked me through the Form 1116 step by step. It analyzed all my Canadian tax docs and figured out exactly which amounts should go where. What really helped was that it showed me how to properly calculate the foreign tax credit limitation, which is super important because you can't claim more foreign tax credit than your US tax liability on that same income. For someone in your situation with employer under-withholding, it would definitely clarify the timing issues.

Just wanted to update after trying https://taxr.ai for my dual-status year with Australian income. Honestly, it was a game-changer. I was really struggling with exactly the same issue - had paid additional taxes to the ATO in 2024 for my 2023 income. The system immediately identified that I needed to split these payments between tax years for US reporting purposes. It also showed me how to properly document everything so there wouldn't be issues if I got audited. The Form 1116 calculations were spot on, and it even created a special statement explaining my dual-status situation that I attached to my return. What impressed me most was how it walked me through the limitation calculations so I didn't waste foreign tax credits. Definitely worth checking out if you're dealing with this complicated dual-status stuff.

I had to deal with the IRS directly about a similar international tax situation last year. After 6 attempts and hours on hold trying to reach someone who understood dual-status returns and Form 1116, I found https://claimyr.com and used their service to get through to an IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed exactly what the first commenter said - foreign taxes are claimed in the year actually paid under the cash method. Having that direct confirmation from the IRS gave me confidence to file correctly. They also explained that I needed to include a statement with my return explaining the dual-status situation, which saved me from a potential follow-up letter.

I have to apologize and eat my words about https://claimyr.com. After my skeptical comment, I was still desperate to talk to the IRS about my dual-status return questions, so I tried it anyway. No exaggeration - I was connected to an actual IRS representative in about 12 minutes. After spending literally weeks trying on my own and never getting through, it was shocking how quick it was. The agent helped clarify exactly how to handle my foreign tax credit timing issues and confirmed I was calculating my dual-status income correctly. The peace of mind from getting official IRS confirmation was absolutely worth it. I've already recommended it to two colleagues with international tax situations.

Don't forget to check if there's a US tax treaty with your country! I'm from the Netherlands and our tax treaty with the US has specific provisions about certain types of income. It might affect how you calculate your foreign tax credit. Also, I learned the hard way that you need to file Form 8833 if you're taking a position based on the tax treaty that's different from what the normal tax rules would require. My accountant missed this and we had to file an amended return.

Just wanted to add that the formula you're using to calculate your US taxable UK income looks right, but make sure you're using the official IRS yearly average exchange rate, not just any exchange rate you find online. The IRS publishes these rates for each year and they're what you should use for consistency. Also, don't forget that as a dual-status alien, you can't take the standard deduction on your return - you're limited to itemizing only, and even then with some restrictions. And check out the special rules about filing a "dual-status statement" that explains your residency dates.

This is exactly the kind of complex situation where getting professional help can save you tons of headaches and potentially money. I went through something similar when I moved from Canada to the US mid-year. One thing to double-check - make sure you're correctly determining your US tax residency start date. For green card holders, you become a US resident for tax purposes on the date you first become a lawful permanent resident (usually the date you enter the US with your immigrant visa or the date your status is adjusted if you were already in the US). This affects your pro-ration calculation. Also, keep detailed records of everything - dates of payments, exchange rates used, copies of all foreign tax documents. The IRS can be pretty thorough if they decide to examine a dual-status return, especially one with foreign tax credits. I learned this the hard way when they asked for documentation going back three years. Good luck with your first US tax return! It gets easier once you understand the system, but that first dual-status year is definitely a learning curve.