topic Re: Form 1116 Explanation Statement in Deductions & credits

Form 1116 Explanation Statement

Daveh110 — Mon, 02 Mar 2020 18:27:35 GMT

I have gotten to: "Check This Entry: Form 1116 (COPY 1) Explanation Stm: Detailed explanation must be completed. Enter your explanation here to complete the required statement. It must show the other deduction items for line 3B column a."

It seems strange to me that I am being asked to explain a number that Turbo Tax calculated and entered. Have I confused the program or is this normal?

I have figured out that the number is the sum of: "Deductible part of Self Employment Tax" and "Self-employed Health Insurance Deduction" So is that what I should put in the explanation?

Re: Form 1116 Explanation Statement

DaveF1006 — Mon, 02 Mar 2020 20:16:54 GMT

Yes you will enter that as an explanation in your return.

Re: Form 1116 Explanation Statement

Anonymous — Sun, 29 Mar 2020 18:17:02 GMT

I just said "See Schedule 1 Part II" which is where this number seems to come from. Seems REALLY dumb that TT gives the user no help to explain a number that it came up with. Could be much improved imo.

Re: Form 1116 Explanation Statement

ThomasM125 — Mon, 30 Mar 2020 19:37:09 GMT

Part I, line 3(b) is for "other deductions" and as such, it may include items that are not on the tax return, such as foreign deductions. The tax filer is asked to provide an explanation to insure that it is complete.

Re: Form 1116 Explanation Statement

Timothy_Trent — Sat, 20 Mar 2021 18:08:44 GMT

How do I open and view the form 1116 "Explanation Statement" to update my entries?

Thanks!

Re: Form 1116 Explanation Statement

JoannaB2 — Mon, 22 Mar 2021 00:08:43 GMT

No, you don't need to explain your foreign tax paid, but you may specify if it was accrued or paid, and/ or if you want to take the credit or claim it on itemize deduction, if qualified,. The foreign tax paid is entered on Form 1116. You file Form 1116 if you are an individual, estate, or trust, and you paid or accrued certain foreign taxes to a foreign country or U.S. possession. To view your Form 1116 of Form 1040:

In Turbo Tax Screen, click Tax Tools, then Tools.
Under Tools Center, scroll down and click View Tax Summary.
Click Preview my 1040, on left side of the screen.
Scroll all the way down until you see "Schedule 3, Additional payments and credits". See attached screenshot.

Re: Form 1116 Explanation Statement

markthebirdman — Thu, 25 Mar 2021 22:40:51 GMT

If the tax was solely for dividends from mutual funds (e.g. $605), would one typically choose the paid or the accrued method?

Re: Form 1116 Explanation Statement

AmyC — Mon, 29 Mar 2021 18:09:16 GMT

A mutual fund would be paid tax.

Re: Form 1116 Explanation Statement

patconno — Tue, 06 Apr 2021 04:02:23 GMT

I'm having this same issue this year. How did you discover what the "other deduction" was that was being enter into line 3b column a? First year I've used TT. Doesn't seem like there's a way to see the actual form 1116 being generated, so I can't even see what the number is that I'm supposed to be explaining....

Re: Form 1116 Explanation Statement

KathrynG3 — Tue, 06 Apr 2021 16:00:55 GMT

To see the Form 1116, TurboTax must be paid for so that you can download the PDF. To get to this section of your return, follow these steps:

Inside TurboTax, go to the search box and enter foreign tax credit.
Select the Jump to link in the search results.
This is the area to answer specific questions to decide how the foreign tax will be reported.

For more information, see 2020 Instructions for Form 1116, page 16. Line 3b is only applicable to report other deductions that don't definitely relate to any specific type of income. For a taxpayer simply reporting foreign tax paid from Form 1099-DIV, it is uncommon for any adjustment to be required.

For more information, see: Filing IRS Form 1116 to Claim the Foreign Tax Credit - TurboTax Tax Tips & Videos

Re: Form 1116 Explanation Statement

pdx_or — Mon, 14 Mar 2022 17:45:14 GMT

So dumb that TT still ask for this "explanation" for TY2021 while not explaining what kind of explanation it is for. Good thing there's google and this thread popped up.

Re: Form 1116 Explanation Statement

tk94110 — Mon, 20 Mar 2023 01:48:21 GMT

But it seems TT automatically filled 3b (Other deduction (attach statement)) with the number from Schedule 1, Line 26 (Adjustments to income). It's TT that is doing this. I don't know know the reasoning, thus I cannot write a statement. What should the statement say about this Other deduction?

Re: Form 1116 Explanation Statement

AmyCA — Mon, 06 Jun 2022 04:24:29 GMT

What I want to know is, why does the sum of the deductible portion of Self-Employment tax and the Self-Employed Health Insurance deduction -- both of which are shown clearly on the main part of the 1040 Form (Part II), show up in Turbotax's calculations for Schedule 1116 related to Foreign Tax Credit (thus generating the requirement for us to figure out where Turbotax is getting that number on Schedule 1116 from and then explain it to the IRS) -- when it never has in previous years? (I have had foreign tax credits before on my tax returns AND I have had both self-employment tax and self-employed health insurance for several years preceding 2020's tax return and never run into this explanation requirement in the "Federal Review" errors section.) And why TurboTax doesn't inform us where it is getting this line 3b information from in the Schedule 1116 worksheet so we have the information we need to explain it to the IRS (without stumbling across the number in looking at the forms TurboTax is generating -- or finding this question in the forums, thankfully).

Re: Form 1116 Explanation Statement

Charles Jones3 — Sun, 19 Mar 2023 17:57:43 GMT

Where and what do I say to explain form 1116 3b A asking for an explan

Re: Form 1116 Explanation Statement

JohnW152 — Sun, 19 Mar 2023 19:30:26 GMT

Explain what your non-Schedule A deductions on line 3b are, and why they're not definitely related to U.S. source income.

The instructions for Line 3b in the Instructions for Form 1116 are somewhat vague. They state:

Enter on line 3b any other deductions that don't definitely relate to any specific type of income (for example, the deduction for alimony paid from Schedule 1 (Form 1040), line 19a).

However, according to the instructions, lines 3a and 3b are used to report deductions that:

Aren't shown on line 2, and
Aren't definitely related to your U.S. source income.

Line 3a is used for certain Schedule A Itemized Deductions, so line 3b would be used for any deductions you claim on your return that are not definitely related to your U.S. source income, and are not among those Schedule A deductions.

The example given is for alimony payments, which would be definitely related to U.S. source income. Similarly, just explain what your non-Schedule A deductions on line 3b are, and why they're not definitely related to U.S. source income.

If you don't know where, on your return, the line 3b deduction is coming from, you may need to go back through your entries in the federal interview to locate the amount. The amount wouldn't be from Schedule A medical expenses, general sales taxes or real estate taxes for your home, since those would be included on line 3a (see the instructions linked above).

@Charles Jones3

Re: Form 1116 Explanation Statement

coolcheermom — Sat, 25 Mar 2023 02:11:34 GMT

once you pay for turbotax you can look at your 1040 or 1040SR (without filing yet).

Scroll down to your form 1116 and look at the amount on line 3b column a

then look at your 1040 (1040SR) and find that amount from above

in my case it was on the line that stated " Adjustments to income from Schedule 1, line 26"

so that was what I put for my explaination

Re: Form 1116 Explanation Statement

Onefish — Tue, 28 Mar 2023 00:19:42 GMT

I'm curious to know why the questions on this thread have not been authoritatively answered. TT seems to leave us high and dry after calculating a number and then letting us twist in the wind. The suggestion that an answer could be discerned after payment for TT has been made is vaguely blackmail-like?

Seriously, some sample explanations would be helpful.

Re: Form 1116 Explanation Statement

DawnC — Tue, 28 Mar 2023 00:36:31 GMT

Can you clarify what question you have or has not been answered? The post above tells someone how to view forms which you can only do after paying for TurboTax (in the Online version). You can preview Form 1040 without paying but if you want to see the details of Form 1116, you will need to pay your TurboTax fees first. But if you have a specific question, please ask here or start a new thread. @Onefish

Re: Form 1116 Explanation Statement

srothman99 — Thu, 27 Feb 2025 17:17:38 GMT

In my case this was triggered by a "penalty for early withdrawal of savings". This was a little hard to track down since the entry for the penalty was not on any form from any financial institution where I paid foreign tax.

But all is good now. I simply entered "penalty for early withdrawal of savings".

Re: Form 1116 Explanation Statement

srothman99 — Thu, 27 Feb 2025 17:20:20 GMT

The penalty was from cashing in a CD early, something I would not think of as affecting foreign tax paid.