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Old 30.01.2013, 20:55
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US Taxes: How to separate Swiss spouses's Swiss tax contribution

When I first started doing my expat US taxes I was only reporting my gross income. Two years later I realized I needed to be putting my bank interest somewhere in there and filling out those FBARs. Whooops.

This year, someone tells me that in addition to reporting my gross income and my interest on my bank accounts, I also need to report:
  • Contributions to the 2nd pillar by my employer (and any interest gained)
So I understand that I am supposed to report something like:
  • Gross income (which includes my new-to-me 3rd pillar contribution and all my 2nd pillar contributions on my part)
  • Bank interest from any accounts (2nd pillar, 3rd pillar, debit, whatever)
  • Employer's 2nd pillar contributions
Am I missing anything else?? Do I need to report something on AHV? We don't have any kids or a house or anything yet. I don't invest any money because it's practically forbidden for Americans here.

But this puts me in a tricky spot because I am now over the FEIE with the exchange rate and with my employer's 2nd pillar contribution. I have never gone over and I am married to a Swiss so we do our Swiss taxes together. He earns way more than I do, so there is no way in hell I am filing my US taxes with him when I don't have to. I always file married, filing separately.

Question is, how do I separate how much *I* have paid in Swiss taxes when I pay them together with my husband? Do I have to wait until we receive our final Schlussrechnung for the 2012 taxes to do my US taxes?

I'm assuming so far that I'll be able to take Gross Salary - FEIE and then pay the difference in taxes (ugh!) to the US on the rest of my income... which should include my non-eligible 2nd pillar pension money from my employer?

...and separately:

FBAR: Currently reporting all my personal and joint bank accts. Do I also need to report my 2nd and 3rd pillars here? What about the rental agency's account that has my and my husband's flat deposit?

FATCA: Now I am not sure if I need to fill this out. Rule says 200k in assets on the last day of the year or over $300k at any day in the year. Does this mean all my personal accts + my pension fund (which is admittedly really low at the moment because I have not worked here long). Do I just need to worry when my pensions + investments + salary = over 200k?

Thanks for helpful answers! I'm sorry this is so long. I've read a lot on the forums but haven't heard how y'all married to Swiss separate your Swiss taxes. If I had the choice I would do them separately to make it easier on my US taxes, but it's not allowed.

Commence freaking out about US taxes until I turn them in.... now!
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Old 30.01.2013, 21:15
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

With complicated issues like these I would have someone do it for you and ask to see the forms afterward so you have an example. My wife who is American had to do taxes for the past 3 years (oops) and actually got a good chunk back thanks to the accountant that did them. We would have lost a good chunk if we had done it ourselves.
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Old 30.01.2013, 21:23
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

If you can afford it, I might recommend getting a US tax accountant. They might even save you money if you miss some deductions and exclusions, etc. Mine dropped some of her fees slightly and is very responsive. http://www.americanincometax.com/custom2.php But anyways! Depending on your particular tax situation and plans to return to the US, investing in the third pillar might not be the best choice for you, tax-wise.

1. Other reportable income. Nothing on AHV. [Gross income - FEIE - foreign housing exclusion] - maybe minus foreign tax credit.

2- Swiss tax credit - I'm not sure about this, hopefully someone married to a non-US person can help you here. But you get credit for tax on income that is not excludable under the FEIE, so you might not qualify for much if any tax credit.

3- FBAR. There are some debates on this forum and elsewhere about whether to report the 2nd pillar on FBAR. My accountant does, and the rental account too.

4- FATCA. Bank accounts + pension funds + other foreign investments.

Good luck!
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Old 30.01.2013, 21:31
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

If you can get your US tax liability by yourself to $0 then no accountant can do better than that.

Are you also taking into account the Foreign Housing Exclusion? Assuming you are renting? You should be able to increase your tax free (US tax) Swiss earnings with this.

http://en.wikipedia.org/wiki/Foreign_housing_exclusion

PS You can do it yourself in Turbotax (Premium I think). If you still don`t get to 0 after housing exclusion then it will make sense to split your Swiss taxes into yours vs your husbands. You can do this on a paid basis or you can wait for the tax returns to be completed.

Last edited by BrianJW; 30.01.2013 at 21:35. Reason: added PS
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Old 30.01.2013, 21:35
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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2- Swiss tax credit - I'm not sure about this, hopefully someone married to a non-US person can help you here. But you get credit for tax on income that is not excludable under the FEIE, so you might not qualify for much if any tax credit.
Hold up. Are you saying they would make me pay 100% US tax on all the money I earn above the limit? And that they wouldn't credit any of the Swiss taxes I already pay on that money? Or am I misunderstanding what kind of credit you are talking about?

Thanks... it is getting so confusing I am close to the point of finding an account, especially because we are buying a flat this year and taxes are going to be a nightmare next year.
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Old 30.01.2013, 21:39
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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If you can get your US tax liability by yourself to $0 then no accountant can do better than that.

Are you also taking into account the Foreign Housing Exclusion? Assuming you are renting? You should be able to increase your tax free (US tax) Swiss earnings with this.

http://en.wikipedia.org/wiki/Foreign_housing_exclusion

PS You can do it yourself in Turbotax (Premium I think). If you still don`t get to 0 after housing exclusion then it will make sense to split your Swiss taxes into yours vs your husbands. You can do this on a paid basis or you can wait for the tax returns to be completed.
Yeah, I can still do the foreign housing exclusion this year because we rented all of 2012, but we are buying next year so I won't be eligible anymore. (Which I think is SO stupid!)

We haven't found out the final taxes for 2012 until we fill out that fun booklet that came in the mail, but after that do I just split it up % what I earn and what he earns? Including all our different stupid incomes from bonuses to military pay... I will try TaxAct first probably... but boy oh boy it's getting scarier and scarier.

I at least want to be able to fill out FBARs myself because it seems silly to pay someone to do that. And FATCA if/when I need to do that.
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Old 30.01.2013, 21:39
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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Hold up. Are you saying they would make me pay 100% US tax on all the money I earn above the limit? And that they wouldn't credit any of the Swiss taxes I already pay on that money? Or am I misunderstanding what kind of credit you are talking about?

Thanks... it is getting so confusing I am close to the point of finding an account, especially because we are buying a flat this year and taxes are going to be a nightmare next year.
No you pay the difference between Swiss tax and US tax on the amount above which you can not exclude. So if you get $90k tax free and earned $100k and paid Swiss tax at 20% (this is the tax credit) and US Marginal rate is 35% then you would pay 15% of the $10k. I`ve ignored housing exclusion, normal deductions etc for this example.
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Old 30.01.2013, 21:42
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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No you pay the difference between Swiss tax and US tax on the amount above which you can not exclude. So if you get $90k tax free and earned $100k and paid Swiss tax at 20% (this is the tax credit) and US Marginal rate is 35% then you would pay 15% of the $10k. I`ve ignored housing exclusion, normal deductions etc for this example.
Ok, that's more like what I thought.

Hope some people married to Swissies can comment on how they "prove" what their Swiss tax rate is. Especially since we married folk enjoy that higher tax rate when the double income pushes us into a higher bracket... technically that's good for something!
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Old 30.01.2013, 21:46
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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Yeah, I can still do the foreign housing exclusion this year because we rented all of 2012, but we are buying next year so I won't be eligible anymore. (Which I think is SO stupid!)

We haven't found out the final taxes for 2012 until we fill out that fun booklet that came in the mail, but after that do I just split it up % what I earn and what he earns? Including all our different stupid incomes from bonuses to military pay... I will try TaxAct first probably... but boy oh boy it's getting scarier and scarier.

I at least want to be able to fill out FBARs myself because it seems silly to pay someone to do that. And FATCA if/when I need to do that.
You can`t claim Foreign Housing exclusion because you can claim the interest as a deduction, so they aren't going to let you claim it twice.

Basically that is what I do. In theory I don`t know if the IRS would accept a more complicated calculation but it wouldn't help you anyway (only could help if you were the major earner) so yes, add up all his taxable income, all your taxable income and if you are 35% of the income then you will get 35% of the taxes.

THEN if you earned $100k and excluded $90k you will be able to take a credit for 10% of the Swiss taxes allocated to you (since 90% of your income was excluded the other 90% of Swiss tax is deemed to be attached to that).

I pay $80 a year for Turbo tax and it walks you through a lot of these issues reasonably well but it helps to have an idea what you are trying to achieve.
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Old 30.01.2013, 22:34
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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Yeah, I can still do the foreign housing exclusion this year because we rented all of 2012, but we are buying next year so I won't be eligible anymore. (Which I think is SO stupid!)
Indeed, why would anyone buy property in CH?

Tom
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Old 30.01.2013, 22:58
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I pay $80 a year for Turbo tax and it walks you through a lot of these issues reasonably well but it helps to have an idea what you are trying to achieve.
+1 for Turbotax. It's a cheap way to at least see what you're in for. If it's more complicated or significant amounts you can always pay a professional as well.

Dan
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Old 30.01.2013, 23:41
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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If you can afford it, I might recommend getting a US tax accountant. They might even save you money if you miss some deductions and exclusions, etc. Mine dropped some of her fees slightly and is very responsive. http://www.americanincometax.com/custom2.php But anyways! Depending on your particular tax situation and plans to return to the US, investing in the third pillar might not be the best choice for you, tax-wise ..........
I use the same accountant as anowheels and I'm also very pleased with the job they do. My situation I similar to yours and the fee I paid last year was about 700 CHF I know this seems like much, but I have the the peace of mind that my returns are correct and all the deductions and credits are made that I myself or even a public software might have missed. Other reason that I spend this money is that I hava a gut feeling that the IRS will hesitate to question my return when it is prepared by an Enrolled Agent that has to take classes with the IRS and pass an IRS exam! So far I've never been audited.
I suggest that you have a professional, like the one stated above, do the returns for you for this year and next year then study them ( they are quite complictaed ) and if you feel you can do it alone afterwards than go for it!

The accountant mentioned above is speaking at a seminar in Basel on Feb. 6th Contact them for more informaton.

Last edited by UncleTell; 30.01.2013 at 23:52.
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Old 31.01.2013, 03:16
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Thanks. That is good to hear, and 700chf seems pretty reasonable!

Dan
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Old 31.01.2013, 09:37
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

All right, thanks for all the useful replies. I will probably try and attempt to do it myself again this year as next year we have the house stuff and then I will hand it all over to someone to pay. I just want to hold on to my 700 chfs for now.

For the people that do use accountants, do you still have to wait for the Swiss taxes to be done this year before filing? Do you always have to use the June Extension and maybe even another extension as well?
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Old 31.01.2013, 10:02
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

Woah woah so many issues to address, and theories flying about.

How to determine you tax credit when married to an NRA? (not a rifle owner)

Firstly, are you on a paid method or an accrued method of reporting foreign tax credits?

If you do not have the final tax determination / assessment, you can do your own online. http://www.steueramt.zh.ch/internet/...erechnung.html or of course you can file extensions and wait, but they end result should be pretty much the same. Likewise, if it is not, you just adjust next year.

From the Swiss TR, you need to allocate your income, i.e. gen lim and passive income between you and spouse. Then allocate your deductions such as professional deductions, interest expense, 2nd and 3rd pillar against the relevant person they belong too, or 50/50 if it's joint expense like child deduction.

What percentage of what is whose? Your total column will be 100%, your partner general column maybe 40%, your general column 20%, and then 20% each on passive (your investment income).

Split the FTC accordingly.


TO clarify the point people are making on taking the earned income exclusion. When you take it, you get a reduction in the FTC you can claim. You do not get to claim 100% of your credit. Why? Because the credit relates to 100% of the income reported, but you are excluding some, so they say you have to scale down the credit accordingly, you can't take 100% credit against 50% income essentially. You do not lose any excess credits not used, they carry forward.

The calc is foreign earned income excluded, divided by total foreign earned income, i.e. 92,900 / 150,000 = .61933. This is your reduction ratio. If you paid 20,000 in taxes, but have claimed the exclusion, you can't credit 20,000. You have to multiply it by the reduction ratio and claim 12,386 as a credit whilst the rest carries forward i.e. you have 10k credit, reduced to 8k because of excluded income, but only 5k is needed to offset US tax liability. 3k will roll forward to be used next year, or year after for up to ten years. You can also go back and use the credit in the prior year to claw back some tax paid.

There are time when a full credit is more beneficial than claiming the earned income and housing exclusions and that should be determined before electing to claim as you can't pick and chose from one year to the next.
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Last edited by JBZ86; 31.01.2013 at 13:26. Reason: clarity / correction
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Old 31.01.2013, 10:12
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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I use the same accountant as anowheels and I'm also very pleased with the job they do. My situation I similar to yours and the fee I paid last year was about 700 CHF I know this seems like much, but I have the the peace of mind that my returns are correct and all the deductions and credits are made that I myself or even a public software might have missed. Other reason that I spend this money is that I hava a gut feeling that the IRS will hesitate to question my return when it is prepared by an Enrolled Agent that has to take classes with the IRS and pass an IRS exam! So far I've never been audited.
I suggest that you have a professional, like the one stated above, do the returns for you for this year and next year then study them ( they are quite complictaed ) and if you feel you can do it alone afterwards than go for it!

The accountant mentioned above is speaking at a seminar in Basel on Feb. 6th Contact them for more informaton.
Haha, return audit is purely random or based on whatever red flags in the IRS system.

Alas, we do not escape the wrath, EA or not. If you get chosen, you get chosen, the EA signature and PTIN will not have any sway
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Old 31.01.2013, 10:46
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

Ok, thanks! That is really helpful. My husband may hate me when I make him help me figure out all these things from our Swiss taxes, but the breakdown between spouse and partner makes sense, as complicated as it is. It also makes sense that I can only deduct the Swiss taxes paid for the actual portion of income over the US limit.

So it would be something like:
Husband's Income - Husband's deductions
Wife's Income - Wife's Deductions
General Income - General Deductions

Then I would divide the general taxes in half and add/subtract them to our individual tax allocations. From there I would have the value for what my Swiss taxes are in relation to my income alone?

But what is the difference between paid method and accrued method of reporting foreign taxes? I'm having trouble understanding that.

For 2012 for example, we paid our 2012 taxes around February last year, but we are only doing the taxes for 2012 now. So last year we did our 2011 taxes around March and then paid any extra we needed to for 2011. And if we get a refund, we receive it from the 2010 taxes. It's all over the place.

Is it OK to just determine (roughly?) with the steuramt online how much we will owe for 2012 and use those numbers for my US taxes? Or should we figure what we exactly what we pay using the method above with our finalized 2012 taxes? If we receive a bill stating we must pay further, do I include that with next year's US taxes or what?

For example, say we pay 20k in taxes at the beginning of 2012. Then we do our 2011 taxes and find out we owe an additional 1500CHF for 2011 federal and cantonal. Do I include the 1500CHF in what I paid for Swiss taxes in 2012? And likewise, if we get a bill in November this year saying we owe more for 2012, what do we do with it?

Ok, thanks! That is really helpful. My husband may hate me when I make him help me figure out all these things from our Swiss taxes, but the breakdown between spouse and partner makes sense, as complicated as it is. It also makes sense that I can only deduct the Swiss taxes paid for the actual portion of income over the US limit.

So it would be something like:
Husband's Income - Husband's deductions
Wife's Income - Wife's Deductions
General Income - General Deductions

Then I would divide the general taxes in half and add/subtract them to our individual tax allocations. From there I would have the value for what my Swiss taxes are in relation to my income alone?

But what is the difference between paid method and accrued method of reporting foreign taxes? I'm having trouble understanding that.

For 2012 for example, we paid our 2012 taxes around February last year, but we are only doing the taxes for 2012 now. So last year we did our 2011 taxes around March and then paid any extra we needed to for 2011. And if we get a refund, we receive it from the 2010 taxes. It's all over the place.

Is it OK to just determine (roughly?) with the steuramt online how much we will owe for 2012 and use those numbers for my US taxes? Or should we figure what we exactly what we pay using the method above with our finalized 2012 taxes? If we receive a bill stating we must pay further, do I include that with next year's US taxes or what?

For example, say we pay 20k in taxes at the beginning of 2012. Then we do our 2011 taxes and find out we owe an additional 1500CHF for 2011 federal and cantonal. Do I include the 1500CHF in what I paid for Swiss taxes in 2012? And likewise, if we get a bill in November this year saying we owe more for 2012, what do we do with it?

Would an American CPA actually go through your Swiss taxes and determine how much you individually owe? Do Swiss-based American CPAs do that? Or do they all do something broad and general?
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Old 31.01.2013, 10:48
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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Gross income (which includes my new-to-me 3rd pillar contribution and all my 2nd pillar contributions on my part)
  • Bank interest from any accounts (2nd pillar, 3rd pillar, debit, whatever)
  • Employer's 2nd pillar contributions
When counting the wages for your foreign earned income exclusion; are you counting the amounts you contributed to employer 2nd pillar and your contribution to the 3rd pillar? Or are you not using the FEIE on those amounts.

(I understand your employers contributions cannot be excluded, but am not sure for your individual)
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Old 31.01.2013, 10:57
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

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When counting the wages for your foreign earned income exclusion; are you counting the amounts you contributed to employer 2nd pillar and your contribution to the 3rd pillar? Or are you not using the FEIE on those amounts.

(I understand your employers contributions cannot be excluded, but am not sure for your individual)
...am I not allowed to use FEIE for AHV and 2nd pillar contributions that come directly out of my income?

I assume since the US does not recognize the 3rd pillar (or apparently 2nd pillar) that it is all included in my gross income, which can be included under FEIE until I reach the limits. If the US won't let 3rd pillar be tax free, then it should be considered income that I am taxed on normally and am allowed to include under FEIE.

I am also assuming (doing a lot of that) that part of the reason why we are not allowed to exclude the employer's 2nd pillar contributions is because we have not been taxed on them in Switzerland, therefore the US wants to tax us on that money because they don't recognize the pension system.
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Old 31.01.2013, 11:05
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Re: US Taxes: How to separate Swiss spouses's Swiss tax contribution

Your salary and husbands salary are General income. The interest, dividends, cap gains, rental, is the passive income.

So you would effectively do this:

.................................GENERAL ................ ........ ...........PASSIVE
TOTALS.......... HUSBAND....... WIFE .................HUSBAND.......... WIFE
243,000......... 150,000 .......80,0000............... 10,000.......... 3,0000

-11200.......... -5600 ............. -5600 (professional deductions)

-1000 ..............................(interest expenses) -500 ................-500

etc
etc


All these numbers will be on your Swiss TR Seite/Page 2 and 3.

Then you arrive at the net figures being assessed in Switzerland.

Out of the 100% taxes accrued in the year, use the site, split it accordingly to the net numbers based on the respective % to the total.

Paid method is what you physically pay in the year, accrued is what you have accrued in relation to that year i.e. you might pay 20,000 in withholdings, but your final bill may stipulate you owed 25,000 in total, even though the 5k balance was not paid until the following year, you accrued it in the year being assessed. You can not switch from accrued to paid. Once on accrued, you stay there. Paid is preferred in theory, but in practice, many localised here will be on the accrued method for timing reasons.

When there are additional payments/adjustments made, in later years, technically you are supposed to amend the US return. In theory, we tend to just make adjustments to the next year to compensate/offset.
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