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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2429
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Hi. I have carryover from foreign tax credit. It looks like

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Hi. I have carryover from foreign tax credit. It looks like I won't be utilizing it because I don't plan to work abroad in the next 9 years. Do I still have to file the form 1116 if I enter 0 on line 47 (line number from 2013 form)?

Anne :

Hi

Anne :

Thank you for using justanswer

Customer:

Hi.

Anne :

As long as you are sure that you are never going to be able to use the carryover, then there's no point in filing the form

Customer:

Okay.

Customer:

Is entering 0 the same thing as not filling in a line on the tax form?

Anne :

No

Customer:

What should I enter if I do not plan to claim the carryover? Leave blank?

Anne :

entering 0 on the form preserves the carryover for possible future years

Anne :

If you're sure you will never use the carryover, you may stop filing the form all together

Anne :

If you're tax program has the feature for notes, you may make a note re: the carryover

Anne :

that is what I do (although the note does not go to the IRS)

Anne :

but as a tax pro, I like to keep that information for my clients.....just in case

Customer:

So you could amend to claim it?

Anne :

Yes

Anne :

Although in 27 years, I've only had to amend it once for that

Customer:

And to be clear, to not claim it, I should leave the line blank and then have no need to fill out the form?

Anne :

You may do that, or I generally just don't file the form anymore

Anne :

Its a credit, not a required form

Customer:

But on the 1040, the line about the foreign tax credit...should I leave it blank then (vs 0)?

Anne :

That choice is up to you................and your tax program

Anne :

some programs will not accept a "0"

Anne :

others will

Anne :

sounds silly I know

Customer:

I wanted to file my own taxes- we only get the standard deduction and have no other complications except for this from 2011. I think I just need to type in the best answer. I thought that if I type 0, I would need to file the extra form?

Anne :

No...the "0" is sufficien

Anne :

sufficent

Anne :

that tells the IRS that you no longer have a need for the 1116 form

Customer:

I see.

Anne :

I apologize for my spelling there

Customer:

The form is only required if I am receiving credit this year or want to carryover.

Anne :

Correct

Customer:

But 0 does not require the form.

Customer:

Great.

Anne :

exactly

Customer:

For a slightly different question...I would only be able to claim it in the future if I were to work in a foreign country and actually owe the US money?

Customer:

I mean owe taxes (paying below US rate).

Customer:

Or get soft income maybe..

Anne :

There are other reasons that you could run into foreign tax

Anne :

foreign investments

Anne :

is probably the #1 reason I see other than the situation like you had when you worked in another country

Customer:

Yeah- I think that will be pretty far into the future...

Customer:

Thanks. This was helpful.

Anne :

Maybe

Anne :

If you invest in mutual funds

Anne :

some of them have a foreign element

Customer:

Ah

Anne :

It usually doesn't amount to much

Anne :

and they normally withhold the foreign tax

Customer:

I didn't realize they were taxed.

Anne :

if they're invested overseas they will often withhold the foreign tax

Anne :

but you file the 1116 to get the % back

Anne :

I don't think you need to carry your credit just in case you invest in mutual funds that have holdings overseas

Anne :

I just wanted you to know that there are other reasons that you may need a 1116

Customer:

Thanks- good to know for the future if I ever had the credit again. And I'm interested in how this works.

Anne :

how it works for mutual funds?

Customer:

Well- tax code for foreign income, investing, etc

Customer:

I just don't like taxes being a black box.

Anne :

welcome to the club................my husband would appreciate your point of view

Anne :

I didn't mean to confuse things

Anne :

IF you invest in mutual funds that have foreign holdings, you are still limited to the % of foreign income vs US income....

Anne :

your carryover would not help you in this situation

Anne :

I just wanted to know that you could have foreign tax paid on something OTHER than wages

Customer:

Okay. Yeah- I just realized that that was how the % was calculated from looking at the forms today.

Anne :

your broker would provide any information you may need for future foreign taxes

Customer:

Okay. Thanks for the help with the question and extra info.

Anne :

You're most welcome

Anne :

Please feel free to ask for me in the future if I can help you again

Customer:

Okay. Have a good weekend.

Anne :

You too!

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