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If Im filling out form 1116 for a foreign tax credit, do I

If I’m filling out form...
If I’m filling out form 1116 for a foreign tax credit, do I have to fill out Line 10 "Carryback or carryover (attach detailed computation)" if I already know that I’m over the limit in this tax year?

e.g. say in 2009, 2010, 2011, 2012 I have $1000 excess foreign taxes each year to carry forward. I can’t apply these until 2013 when I don’t have an excess of foreign taxes.

So in my 2013 form 1116 on Line 10, I would apply the $4000 foreign taxes carried forward (note there was no foreign income in 2008, so no carryback).

But… in the intervening years like 2010, 2011, 2012 would I need to declare the accumulating excess foreign taxes on Line 10 of form 1116 for all those years too? i.e. $1000 in 2010, $2000 in 2011, $3000 in 2012?

The reason I ask is that if I make a mistake anywhere along the way, that would mean recalculating and amending every tax year which seems time consuming for everybody (IRS and myself)…
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Answered in 5 hours by:
6/17/2013
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Hi Wayne

Thank you for your question. Yes, you must continue to file Form 1116, and include all of your unallowed losses

Please see below:


Line 10

Enter the unused foreign taxes in the separate category from another tax year that are eligible to be carried forward to or back to 2012.


I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

 

 


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Customer reply replied 4 years ago

Thank you for responding!


 


Indeed, I have to file form 1116 every year whilst living overseas. I was wondering if I had to declare a Line 10 number from a previous year or not...


 


Copy pasting the form 1116 instructions from page 16 isn't really helpful. That's what I've already read of course which is why I asked using that example to fit my particular scenario. The form 1116 instructions are ambiguous, especially when read in conjunction with publication 514 on foreign tax credits.


 


i.e. in pub 514 under "Carryback and Carryover" Example 2 says


"...You cannot carry the $200 of unused foreign tax from 2007 to 2008 or 2009 because you have no excess limit in either of those years..."


 


So that's why I said above


 


"e.g. say in 2009, 2010, 2011, 2012 I have $1000 excess foreign taxes each year to carry forward. I can’t apply these until 2013 when I don’t have an excess of foreign taxes.So in my 2013 form 1116 on Line 10, I would apply the $4000 foreign taxes carried forward (note there was no foreign income in 2008, so no carryback).

But… in the intervening years like 2010, 2011, 2012 would I need to declare the accumulating excess foreign taxes on Line 10 of form 1116 for all those years too? i.e. $1000 in 2010, $2000 in 2011, $3000 in 2012?"


 


Can you please have another look at this in the context of the example and pub 514's Example 2 under Carryback and Carryover?


 


cheers,


 


Wayne

Hi Wayne

Well, I guess I can now safely say that I am NOT at the top of my game at 5:00AM

You're absolutely right. The carryover figure does NOT go on line 10.

You will create a work sheet (or your computer should created one) that is similar to this::

2012 unused foreign tax credit $____

2011 unused foreign tax credit $___

If you happen to have both passive and general income that you have carryovers for, then you should see something similar to this:

2012 passive unused foreign tax credit$_____

2012 general unused foreign tax credit $_______

Again,I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

 

 

 

 

 

Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Anne and 87 other Tax Specialists are ready to help you
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Thank you very much for the accept and the excellent rating!

Please feel free to ask for me by name if I can help you in the future.
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Customer reply replied 4 years ago

Hello sorry to comment again, but I think I'm having second thoughts about this answer and I may have misunderstood and convinced you to agree with me

For example the 2012 pub 514 page 32 has a

1) line 10 carry over of $200

2) line 14 total amount of foreign taxes of $8,916

3) line 21 maximum credit amount of $7,219

So I think the IRS does want us to keep a running tab of Carry back / Carry Over for line 10, but also to Declare that in line 10 each year not leave line 10 blank even if I'm already over the maximum credit amount...

Just Answer has some other answers relevant e.g. http://www.justanswer.com/tax/6hbil-irs-form-1116-line-10-constitute-detailed.html or http://www.justanswer.com/tax/4qzvx-filling-form-1116-unclear-calculate.html in case somebody else is reading this :)...



Hi Wayne

First, please don't ever feel sorry that you have additional follow up questions. I can assure you that I, like you, have only 1 goal in mind, and that is to give you the correct answer AND to hep you understand the process.

You will also find that if I make a mistake, I'm not shy about admitting it. Hanging on to the wrong answer just to protect my stats here in Justanswer land does not do anyone any good at the end of the day, so lets revisit your question and see why you have 2nd thoughts

Ok....I've checked everything I can find re whether or not you need to file the form and enter the carryover on line 10................I will be eating crow soon........hoping it tastes better with BarBQue sauce............because I did tell you incorrectly .....and I really do apologize.........I actually fill out alot of these forms every year....but I have no idea what I was thinking of when I gave the incorrect information.

The detailed computations from above (Ex: )2011 unused foreign tax credit $___) should be attached to the 1116 Form when you file the return since you will have to mail it in at the point anyway;

Also, please remember to file a separate Form 1116 if you have different kinds of foreign income. Ex: you get dividends (which is passive income, so you will have to file an 1116 form for passive income.

If you also have wages, etc, that would considered general category income, and you would need to have a separate form 1116 for this category.

I truly want to thank you for coming back to this thread so that I could correct my mistake.........please know that follow up questions are free.......and I certainly owe you this one.

You don't know of any REALLY good BarBQue sauce do you?
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Anne
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