Foreign taxes and Form 1116 and Carryover

[hillelri]

I have had a longstanding question about foreign tax carryover in TT. In some years I have not used all the foreign taxes paid for that year as a credit and other years the opposite, I got a credit greater than foreign taxes (FT) paid that year.  The question relates to the running "carryover" chart. In i.e. year 2016, I paid FT of 318, had none disallowed, and got credit for only 91 that year. I would assume the amount utilized is 91 and the carryover is +227. However in 2017, I paid 521 in FT, had none disallowed and received a TT foreign tax credit of 613. Is the amount utilized that year 521 or 613.  If the latter, than is the carryover -92?  When I look at the TT carryover chart in the last column, is that supposed to be a series of + and - numbers depending on what happens a given year or is it a running total, taking the recent year into account. When I look at the TT carryover tally over the 10 years I have used it, it seems incorrect and does not seem to take into account the years that I got a credit that was greater than the FT paid that year.  All my foreign taxes are passive, just due to dividends from stocks on US stock exchanges.

Thank you in advance for any answers to this.

[rogge1722]

I suggest you download Pub 514 and on p24 they give 2 examples on the mechanics of carryovers.  This should help you analyze your specific situation.

[MaryK4]

1. Go back to the page in which you filed out the amounts of foreign tax utilized in each year

2. For each year in which the "utilized" value is higher than the "foreign tax" value, set utilized to be the same as the foreign tax, and the difference should be included in the "utilized" from a previous year

 @hillelri

[hillelri]

Sorry to reply so delayed but I appreciate your reply.  I do have another associated question.  If I utilized more than the foreign taxes paid in a given year, and the previous year was "fully utilized", should I increase the utilized amount going back two years.  I know it is a running total for 10 years, with each new year dropping the earliest year, can I even "utilize" a year going back 5 years or just the "previous" year?

[DaveF1006]

Normally with foreign tax carryovers, you can carryback the credit one year and then carryforward ten years.

[hillelri]

When you carryback the credit one year, is that a way to amend the previous year's tax consequence, which in most cases does not seem worthwhile?

[DaveF1006]

Yes you can amend a previous year's return to include a foreign tax credit carryback. To amend a 2020 return, go to:

1. Sign in to TurboTax. 
2. Scroll down to under Your tax returns & documents, 
3. Select Amend (change) 2020 return, 
4. Then Start amending my 2020 return. 
5. Then, select the reason you’re amending and follow the onscreen instructions.

Once you are back into you return, follow these steps listed by linaJ2020 in her Turbo Tax post. 

• Open up your TurboTax account and select Pick up where you left off
• At the right upper corner, in the search box, type in "foreign tax credit" and Enter
• Select Jump to foreign tax credit
• Follow prompts 
• On-screen Excess Foreign Tax Credit, select Learn More.

@hillelri