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Yes, it is correct that the form hasn't been finalized by the IRS yet. Here is a list of form availability or the IRS.
It would generally be best to take the foreign tax credit since the standard deduction is better for most people.
You would enter the lump-sum foreign pension as Other Taxable Income following these instructions:
In TurboTax Online, go to Income & Expenses
Scroll down to Less Common Income, Start
Click on Miscellaneous Income, 1099-A, 1099-C, Start
Select Other reportable income,
Any Other Taxable Income? Answer Yes
Any Other Taxable Income
Here is a link to a helpful article about entering foreign tax.
Thanks. This is helpfuI. I assume that after entering this income I go to the deductions and credits section to claim and foreign tax credit. When I do this there is an option to itemize vs taken the foreign tax credit. (Form1116). When I select foreign tax credit however it says that the IRS hasn’t’ finalized the form 1116 for 2021. Seems strange. Is this correct though- try to get a foreign tax credit - or should I itemize or do something else?
Thanks for your help
Yes, it is correct that the form hasn't been finalized by the IRS yet. Here is a list of form availability or the IRS.
It would generally be best to take the foreign tax credit since the standard deduction is better for most people.
Thanks
I followed the instructions in this email chain and entered the money as other income and said it was a lump sum pension distribution. I waited until the form 1116 was available ( today for 1st time, yes it’s already March 3rd in Europe where I live)) But this form asks me to enter the income again ( is it counted twice now?) and says that I can not get credit for lump sum distributions from foreign countries. It says I can list it as passive income but when I do this the credit I get is only 3% of the taxes I paid. Seems like I’m doing something wrong. I’m confused. Thanks
It depends. First of all, enter the income again as it asks and then you can verify if the income doubled on your return by going to tax tools>tools>view tax summary>preview my 1040. Here verify the income amount by going to Schedule 1 Line 8Z to see if it doubled.
As far as the difference in the taxes paid, it could be a couple of different things.
Thanks for the response
I see my return and I can see that this income was not counted twice.
On my 1040 under schedule 3, non refundable credits, it lists the foreign tax credit and says attach form 1116 if required, but there is no form 1116 attached, so I don’t know if there is carryover.
To clarify, what is the amount of foreign tax that is recorded in Schedule 3?
Prior to adding this lump sum payment on the 1116 form, turbo tax was showing a foreign tax credit of $118 that it calculated when it imported my investment 1099’s from e-trade. Now that I’ve added in this lump sum payment , schedule 3 shows $289 in foreign tax credit. That’s an additional $171. I paid $4982 in foreign taxes.
There may be an excess carryover. If you can't claim a credit for the full amount of qualified foreign income taxes you paid or accrued in the year, you're allowed a carryback and/or carryover of the unused foreign income tax. You can carry back for one year and then carry forward for 10 years the unused foreign tax.
@sfshore2
On the return that TurboTax created there is no reference to carry over and there is no form 1116 attached
i assume that I can’t claim this next year if it’s not included in this years return.
you mention carry back and forward. I sold a property in 2020 and paid huge capital gains . Can I use the carry over to get a reimbursement/ credit against taxes I paid?
You can't use the foreign tax credit against non-foreign income, so a carryback would not benefit you if you didn't have any foreign income in the previous year. That is why your credit allowed in the current year is less than the full amount of foreign taxes paid. The only way you could take the full credit in the current year is if all your income was foreign income in the current year.
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