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Foreign Tax Refunded. How do I reverse my foreign tax credit?
In 2021 UK foreign taxes of $5000 were withheld for cashing in a pension plan. I was able to use $2000 of the $5000. as a foreign tax credit against my 2021 taxes. I have a carryover of $3000 to 2022.
In 2022 I received a refund of the full $5000 from the UK. I have not filed my 2022 tax return as yet as I have a extension and am hoping I can report the refund and negate the carry foward within my 2022 return.
Can I report the refund on my 2022 tax return somehow? I don't think I can just list it as income in 2022 as it is a tax credit, not income.
Must I file an amended 2021 return? If I do it doesn't seem fair that I will most likely incur penalties.
From what I read, I may be required to file form 1118, Schedule L to report the refund in 2022? Turbo Tax does not offer this form and I don't want to mail in a paper return. Last time I did that it was a 10 month wait.