Hi and welcome to Just Answer! Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. You make the choice by checking the box in Part II of Form 1116. Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue.As you noted - the election is irrevocable and may not be revoked simply by amending previous tax returns. That is possible - but only with the written consent of the IRS. Generally - the taxpayer should apply for the PLR to get such consent.
Thanks. As a follow up, can you explain what a PLR is and how we would apply should we decide to do so?
PLR - Private Letter Ruling is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s represented set of facts. A PLR is issued in response to a written request submitted by a taxpayer.
Revenue Procedure 2011-1 sets forth the issues on which taxpayers may request PLRs and the circumstances under which the IRS does not issue PLRs. It also provides instructions on what documents and information are to be provided as well as on procedural requirements.
The procedures and user fees for obtaining a letter ruling are published annually in the first revenue procedure of each calendar year. The current procedures are in Revenue Procedure 2013-1 which can be found in Internal Revenue Bulletin 2013-1.
A request for a letter ruling including the applicable user fee should be sent to: Internal Revenue Service Attn.: CC PA:LPD:DRU P.O. Box 7604 Ben Franklin Station Washington, DC 20044
Excellent. Thank you.
Please be aware that might be complicated procedure and could take long time with no guarantee of positive results.
Good to know. Thanks again.
Lev, is there any specific pub or section you can point me to that tells us that we cannot simply file an amended return in order to revoke the foreign taxes accrued election?
you're the best. thanks.