I am trying to trace the calculation of the value showing in my Form 1116 Foreign Tax Credit Computation Worksheet Line 1k. The software help stops at line 1j and I cannot find anywhere a worksheet backing up the figure. I'm not saying the number is inaccurate (although it is questionable) but I want to verify its calculation.
Where might I find the support for this value among my 1040 work papers, please?
FWIW, I am an individual filing jointly for tax year 2022 and have some passive income from a foreign source for which I want to get a credit. I've received a credit each year over multiple years in the past and never ran into this issue before (at least that I noticed).
Your advice appreciated, thank you.
1h-1l=1k. If the amount in 1h is 20K or more, it requires adjustment. Right click on 1l and select data source for the algorithm. If you are using the Qualified dividends and Capital Gains worksheet, the algorithm is correct. If you are using the Schedule D worksheet, the algorithm has errors. If appears it needs updating due to changes in the Schedule D worksheet.
Thank you very much for the quick reply.
When I am in the form looking at the various line 1 values 1l is not 'hot'. That is, nothing happens when I right click on it (or double click... or anything else!).
Also, apologies I cannot see whether I am using the QD/CG worksheet or the Schedule D version. Both worksheets appear and have figures on them but neither shows the value in 1l anywhere.
So... because I cannot select the data source for the 1l entry anywhere, I am still at a loss for how to verify the number.
Separately, it seems strange that I am adjusting Foreign Dividends (I have no Foreign LTCGs) using figures on the 2 worksheets that include all qualified dividends, i.e. those from domestic sources as well are added in. This may simply be my tax naiveté.
Thank you, again, for the help so far. My software is up-to-date so I am not sure why I cannot right click 1l to get at the source.
If for any reason TT initiates the Schedule D, it will replace the default “qualified dividends and capital gain tax worksheet” with the “schedule D tax worksheet.”
If the amount in 1h is 20K or more, an adjustment is made. The built in algorithm is correct but the explanation for the Schedule D tax worksheet is outdated; the capital gains worksheet is still current.
Here is a copy:
Form 1116 (COPY 1) -- Foreign Tax Credit Comp Wks : Adjusted QDI income
Line 1l, columns A, B and C:
If the Foreign Qualified Dividends and/or Capital Gains Adjustment Smart Worksheet checkbox is not checked, from Line 1f.
Otherwise, from Line 1g, plus the result of one of the following calculations, depending on whether the Schedule D Tax Worksheet or the Qualified Dividends and Capital Gain Tax Worksheet is used:
If Schedule D Tax Worksheet is used.
- Line 1j multiplied by the Sch D Tax Worksheet, line 40, divided by the Sch D Tax Worksheet, line 11a. The result is multiplied by 0.7568.
PLUS
- Line 1j multiplied by the Sch D Tax Worksheet, line 11a minus line 40, divided by the Sch D Tax Worksheet, line 11a.
PLUS
- Line 1i multiplied by the Sch D Tax Worksheet, line 37, divided by the Sch D Tax Worksheet, line 11b. The result is multiplied by 0.6757.
PLUS
- Line 1i multiplied by the Sch D Tax Worksheet, line 11b minus line 37, divided by the Sch D Tax Worksheet, line 11b.
PLUS
- Line 1h minus line 1i minus line 1j, with the result multiplied by the following ratio:
-- Sch D Tax Worksheet, line 31, multiplied by 0.5405, plus
-- Sch D Tax Worksheet, line 28, multiplied by 0.4054.
-- The sum of the above two lines is divided by the sum of Sch D Tax Worksheet, lines 20, 28, and 31. The result is the ratio to be used. If the sum of lines 20, 28, and 31 is 0, the ratio is defined as 1.
NOTE: With the exception of the last line for how to calculate the ratio, the result of any calculation which has a 0 as a denominator is defined as 0.
If Qualified Dividends and Capital Gain Tax Worksheet is used.
- Line 1h multiplied by the following ratio:
-- Qualified Dividend/Capital Gain Wksht, line 20, multiplied by 0.5405, plus
-- Qualified Dividend/Capital Gain Wksht, line 17, multiplied by 0.4054.
-- The sum of the above two lines is divided by the sum of the Qualified Dividend/Capital Gain Wksht, lines 9, 17, and 20. The result is the ratio to be used. If the sum of lines 9, 17, and 20 is 0, the ratio is defined as 1.
NOTE: Calculated result may be adjusted by up to $2 to allow columns A, B, and C to add up to the Total column after accounting for rounding.
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If you are using the Schedule D Worksheet, here is a shortcut to calculate the amount retained on 1l. It does not include any amount in 1i or 1j, so if there are amounts in 1i or 1j, it will be an approximation.
The ratio:
(Line 30 x 0.4054) +(Line 33 x 0.5405)
Line 2a
Multiply the result by the amount in 1h and that should be or close to the amount in 1l, the amount retained. Subtract that from 1h and the result is in 1k, the amount adjusted ; (reduced)