1040X, + claiming additional tax credit in past years

[johnleesupertaster]

I discovered that I forgot to claim a small amount of money on my US taxes last year. Had I included this income, I still would not have owed any money once I include my foreign income exclusion. Do I still need to file an amended return to declare this income even if no additional tax results?

On a related note, if I did amend my past return, could I now elect to give up the foreign income exclusion for that year and take the foreign tax credit instead so that I could claim the additional child tax credit?

[nelsona]

Yes, you must amend your return to include the income, since, technically, you excluded only the amount in the original return. You can never arbitrarily under-report income.

And yes, you can revoke your use of 2555 for any past year (past 3 years). the effect will be to prevent you from using 2555 for 5 consecutive years, unless you get authorization from IRS.

See IRS Pub 54 on 'revoking the exclusion'
By the way, that same issue makes those who want to only 'partially' exclude income a warning:

"Once you choose to exclude foreign earned income, you cannot take a foreign tax credit or deduction for taxes on income you can exclude. If you do take a credit or deduction for any of those taxes, your choice to exclude foreign earned income may be considered revoked. See Publication 514 for more information"

So, someone who would try to, say, only exclude $60,000 of their $75,000 foreign wages, so that they still qualify for child credit, may have problems.

In any event, the foreign exclusion (for those living in Canada) is of little value anymore, due to the stacking rules and the child tax credit rules.

[johnleesupertaster]

Thanks. Reviewing my records, it looks like this applies for actually my last four returns. The oldest is more than 3 years ago---obviously I can't revoke my exclusion for that one, and I guess the IRS can't come after me for the small amount of unreported income in question for that year. Is there any reason to amend that return to report the missing income even though the statute of limitations is past, or do I let sleeping dogs lie?

[nelsona]

I would forget the 4 year old one. For the other 3 (at least the last 2) you should be switching to FTC anyways.