Foreign Tax Credits

[user17712903551]

I have $500 of foreign tax credits on my 1099-Div.  Some of those I will need to carryover and use in 2026.  I cannot get TurboTax online to create form 1116.   Only when I manually change the foreign tax credits to over $600 does it generate a form 1116.   How do I get TurboTax online to generate a form 1116 for less than $600 of foreign tax credits?  Thanks

[DaveF1006]

Try changing the amount of the 1099 DIV to over $600. This should generate the Form 1116. Close or log out of return and then open or log back in again to record the change.

Now, change the amount of foreign tax paid  on your 1099 DIV back to $500. Form 1116 should stay in your tax return. You can report your foreign tax credit and go through the screens to get the carryover amount to appear in next year's return. 

[user17712903551]

Thanks for the response.   

Unfortunately, after I log back in and put the foreign tax credit back to $500, the form 1116 disappears.

So adjusting to $600 did create a form 1116 and I then logged out as suggested.   When I logged back in, the form 1116 was still there but when I put the foreign tax credit back to the actual $500 amount, it went away again.

Any other suggestions?

[DaveF1006]

To clarify, when you put $600, did you report the previous year's carryovers? Also, did you claim a credit in previous years and choose the simplified election?

[user17712903551]

I claimed a foreign tax credit last year but did not have a carryover so no election was made.  

Thanks

[DaveF1006]

Check your list of forms to see if there is a 1116 Comp Wks. There should be one listed in your forms even though there isn't an actual Form 1116. IRS does not require a Form 1116 but the worksheet is there for your own records to help you keep track of your carryover into next year.

[user17712903551]

No form 1116 worksheet was created.   So the IRS does not require form 1116 to be filed?

Can I track my foreign tax credit carryovers in an excel spreadsheet if TurboTax online won’t track on Form 1116 or form 1116 worksheet?

thanks

[DaveF1006]

 To clarify, what version of TurboTax are you using? Is it online or Desktop?

[user17712903551]

Turbotax online

[DaveF1006]

To clarify again, are you able to utilize your entire credit this year, or was there a carryover? I tested this in TurboTax online, and it just gave me the full credit and did not ask additional questions. 

What I did next was change the amount of the 1099 DIV to over $600. Then I went through the foreign tax questions again. When it asked me if I wanted to take the simplified election, I said no.  I then continued through the interview until I was done.  When done, I looked at my forms and saw that Form 1116, the worksheet, and Schedule B (1116) was present in the forms.

Next, I changed the amount back to $500. When I looked at the forms, all that remained was Form 1116 -- Foreign Tax Credit Comp Wks. 

The main ingredient here is in the first step, indicate that you do not want to take the simplified election. Try this to see if this is the missing ingredient. This will only work if you had a carryover and were unable to claim your full $500 credit this year.

As far as the spreadsheet, you can create one for your own records. The only problem is that if you took a credit that was under the Foreign Tax Credit threshold, IRS won't allow the carryover to be applied for future years. The IRS explicitly states in Topic 856

"If you claim the credit without filing Form 1116, you can't carry back or carry forward any unused foreign tax to or from this year"

Having the Form 1116 -- Foreign Tax Credit Comp Wks. in your return may be your saving grace for next year.

[user17712903551]

I am not able to take any of the foreign tax credit due to no taxes paid or owed in 2025 and I would like to carry forward 100% of the under $600 amount to future years.    

I tried your suggested steps below and the Form 1116 and worksheets do appear when I adjust the foreign tax credit to over $600 but when I adjust back down to the actual amount of $500, the form 1116 and the worksheet both disappear.    I was not able to replicate what you did because maybe I did not use any of the credit in 2025?

Based upon your reference to IRS Topic 856, I need Form 1116 in order to allow carry forward.

Is my only option now to convert from Turbotax Online to Turbotax Desktop and create Form 1116 in forms mode as I have seen recommended in other community chats?   

It seems like Turbotax Online is flawed in this particular situation since it won't allow me to produce a form 1116.   I guess I could force my foreign taxes to be above $600 to produce Form 1116 and allow carryforward and then adjust the carryforward down when I complete my 2026 tax return?   This will have no impact on my 2025 tax return since I am not using any of the foreign tax credit in 2025 since my taxes are -0-.

I appreciate your help.

[DaveF1006 · Accepted solution]

Yes, if you are using TurboTax Online, you can report over $600 paid for foreign taxes just as long as it doesn't have an impact on your return. The reason why you will do this is for the sole reason to generate a Form 1116, which is necessary to generate the carryover. As you mentioned, you can adjust it downward next year. 

One thing that needs to be mentioned is that carryovers must be applied to a previous year and then carried forward for ten years.  If you had foreign income in 2024, you will need amend your 2024 return to apply some of this carryover.  Any unused carryover will then be applied for ten years, starting with the 2026 tax year.

The other option is to use the desktop version. It will force Form 1116 into the system, but I like your suggestion for fixing the online version.  If you were questioned by the IRS for the inconsistency, just mention that you reported this in this manner just to generate a form 1116 so you can apply your carryovers. I seriously doubt if this will ever be an issue though. 

@user17712903551