Simplified Foreign Tax Limitation Election (for AMT)

Forum|Forum|5 years ago
August 17, 2020
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I'm amending my 2018 form 1040. My 1099-DIV reports $14 in foreign tax paid on $73 in foreign dividends. I have no other foreign income.

My 2017 tax return wasn't prepared by TurboTax or by me. In it, I have a form 1116 that I can't view because it wasn't attached to the filing. However, I can view the carryover utilization worksheet for foreign tax credit (also paid on foreign dividends) . How can I determine whether my 2017 tax return elected the Simplified Foreign Tax Limitation Election? Thanks!

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The Simplified Method is when you claim the FTC without filing form 1116. the penalty for doing this is you lose the right to claim any FTC carryover. Under the SM, if you are single you can claim up to $300 of FTC ($600 if married) on passive income without filing the form. The credit is also limited to your tax liability. so if you have $300 of FTC, a tax liability of $200, and elect the SM you reduce your liability to $0 but lose the $100 carryover. it would seem that since form 1116 was not included in the filed tax return you have no usable carryover from 2017.

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foreign pension

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This is the first year, my foreign tax credit is more than $1000, so I need to choose "Simplified Foreign Tax Limitation" . Once I choose this, I can't file my tax online. I don't need to pay any ATM. Should I still select the Simplified Foreign Tax Limitation or I can just choose the Non-Simplified AMT and wait until I need to pay ATM ( unlikely)?

Going forward, I will receive Pension income from Canada every year, so I will expect my FTC around $1000 each year. In my case, should I choose the Simplified foreign tax limitation or Non-Simplified AMT?

Thanks.