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    jdivine's Avatar
    jdivine Posts: 1, Reputation: 1
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    #1

    Feb 13, 2014, 10:32 AM
    Foreign wage income settlement
    I have a client who received a settlement in 2013 for disputed wages in Brazil from 1999. Employment taxes and income taxes were withheld in 2013, along with attorney and other fees, before the balance was remitted to a US bank. How do we report and claim a foreign tax credit for these amounts. Interest on the wages was also paid and was substantial. A little help here? Thanks. James
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Feb 13, 2014, 11:54 AM
    The interest is taxable and is reported on Schedule B with Form 1040.

    If the court case involved unlawful discrimination, then the attorney and court fees can be deducted as an adjustment to income on Line #36 of Form 1040. Otherwise, the fees are an itemized deduction on Schedule A.

    You use Form 1116 to claim the Foreign Tax Credit, probably as general income.
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