Do I need to file Form 1116 Carryover Worksheet even though this year I have no need to file Form 1116

[nikki20201]

I have Form 1116 FTC carryover credit from last year.
But this year 2020 I have no taxable foreign income so I do not need to file Form 1116.

However in order for IRS to keep track of my previous FTC carryover credits do I still need to file the Carryover worksheet along with my tax return ?

Thank you

[KathrynG3 · Accepted solution]

Yes, you should continue to file the Carryover worksheet to keep track of the FTC carryover credits. 

For more details, see: 

TurboTax resource: Filing IRS Form 1116 to claim the Foreign Tax Credit

IRS resources: Tax Topic 856 and IRS Publication 514 Foreign Tax Credit for Individual

[nikki20201]

Hi When Form 1116 is not being filed for the year, does it still allow you to still create & send a carryover statement?  The links you send are  silent on this situation.

Thanks

[DaveF1006 · Accepted solution]

it depends. If you are reporting a carryover from a previous year, do this.

1. Click on Federal Taxes > Deductions & Credits > I'll choose what I work on].
2. Scroll down to the Estimates and Other Taxes Paid section.
3. Click on the box next to Foreign Taxes. 
4. On the Foreign Tax Credit screen, click on the Yes box.
5. Continue through the interview, entering the requested information. 
6. You should arrive to the Carryovers screen.  Click the Yes box.  
7. Enter your carryover amounts on the next screen -- Foreign Tax Credit Carryovers.  

[nikki20201]

Last year I had used TurboTax desktop version, and this year I was planning to use TT Online.

But after this complication arose whether I have to manually add 1116 carryover statement,  I thought to avoid problem, best to purchase TT desktop version. 

Once I did that at start up it then read the old 2019 tax file. So though I did not have any Tax Credits to claim this year, I see it auto created a blank Form 1116 and also attached the CarryOver Statement for future tracking to the Federal Forms that are required for Filing.

So to the others who may have the same as my question - YES you need to attach it, even if not claiming credits for the year, so carryover are not hidden in the years they are not claimed.

[LinaJ2020]

If you want to claim the foreign tax credit and enable to carry forward any unused credit balance to future tax years, you must file Form 1116.  Without filing Form 1116, you give up this carryover tax break.

Note that when you have a foreign tax credit to claim in the future, you would need to manually enter the carryover amount on the screen.  TurboTax will not automatically fill in the blank for you. 

Per IRS, 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, except that no carryback or carryover is allowed for foreign tax on income included under section 951A. You can carry back for one year and then carry forward for 10 years the unused foreign tax. For more information on this topic, see Publication 514, Foreign Tax Credit for Individuals.

[SzamanNakota]

@LinaJ2020 : thank you for your answer. I have some more questions about that.

I have a FT credit that i want to carry forward and I can't make TT file 1116 form for me.

These are the steps:

- Deductions & Credits
- Continue
- 'I have foreign tax credit carryover that I want to use. Learn more'
- Continue
- Continue
- Take a Credit
- Continue
- "Do all of the following apply to your foreign income and expenses? - All foreign taxes paid were reported with interest and dividend income only. - You are claiming no expenses against foreign income. - You are claiming no adjustments to foreign income." ---> Yes
- "Foreign Taxes Were" Paid -> Continue
- "Do you have any foreign tax credit carryovers from 2019 or a prior year?" -> Yes
- I filled 'Foreign Tax Credit Carryovers' -> Continue
- I filled 'AMT Foreign Tax Credit Carryovers' -> Continue

I see final page:
Excess Foreign Tax Credit: You have an excess credit that can be carried forward for up to ten years to reduce your taxes. In some cases, you may also need to carry back this credit amount to last year by amending last year's return to claim an additional refund.

I clicked Continue and I was back to 'Deductions & Credits'

Now I went and printed tax return preview and I see new pages:
- Foreign Tax Credit Computation Worksheet 2020
- Foreign Tax Credit Carryovers (with the correct values i want to carryover to 2021 and further)

Though these are worksheets and they are not going to be efiled. There is no 1116 form.
What I am doing wrong? How can i get 1116 generated ? If I understand it right I need to file 1116 in order to be able to use the carryover in future.

Thank you in advance 🙂

[LinaJ2020]

The IRS does not have very clear guidelines whether you have to file a Form 1116 every year for the carryovers even though you do not have foreign taxes paid.  However, you must file a Form 1116 for the year you initially file the foreign tax credit. 

If I were you, without having paid any foreign taxes, I would still file the Form 1116 every year, with the carryforward amount, just to be safe. 

 I will suggest you to enter zero as foreign income and foreign taxes to see if the program will generate a Form 1116. 

@SzamanNakota

[SzamanNakota]

@LinaJ2020 : Thank you very much. I have tried that and it worked! It took me a while to figure out why UI does not want to generate that, but i found that i need to provide a 'dummy' country in order to make it work. I provided a country that the income originally came from years ago. That let TT generate 1116 with a single column/country (the one i provided) and no value populated in lines 1a-6. BTW I noticed that company that did my tax returns for last couple of years filed 1116 in the same way (they put two columns representing countries which the income came from years earlier, but they have not populated any of 1a-6 lines).
Also - the line 10 (and same value for line 11 and 14) with the CORRECT carryover amount is now populated and TT put there a reference to a statement which also is generated correctly (with correct 'carryover to 2020' amount). Line 35 is 0 - so that does not affect my tax position I believe.

Oh, one more thing - maybe others will find it useful.
In order to all of that I had to answer NO to the "Do all of the following apply to your foreign income and expenses?" question (in my original comment above I tried answering YES, and that did not make it).

[LinaJ2020]

Awesome!  I am glad your issue is resolved and thank you for sharing the information and feedback.  

[jess2301]

Do I only file to keep track of FTC or am I required to file form 1116 even though I didn't have any foreign income in the last few years (last foreign income was in 2017)? It is a real pain to file form 1116 with TT this year.

[ThomasM125]

You are not required to keep the worksheet in your program.

You would need to keep the worksheet in your program if you want to have the carryover credit applied automatically to next year's return in TurboTax. Otherwise, you don't need to file it with this year's return since you can't claim the credit this year.

You may be able to delete the form 1116 to remove it from your program.

A simple way to delete forms in TurboTax online is to use the Tax Tools menu option, which is on your left menu bar when you are working in your program. Then, choose Tools and then Delete a form.

If you are working in the download TurboTax program, use the Forms Mode on your menu bar to bring up the form you want to delete, then choose the Delete Form option at the bottom of the form.