Form 1116 Line 12 error

[akrawitz]

By all accounts, Form 1116 Line 12 should be empty on my return, but instead it has a value equal and opposite to my total foreign taxes paid on Line 9. I do not have a Form 2555 and I am not taking a foreign earned income exclusion.

When I look at  the Foreign Tax Credit Computation Worksheet Part III Lines 12a(1-5) I see this:

1. 0.
2. 0.
3. 1.0000
4. 22,849
5. 22,849

It isn't clear to me why this section is filled in at all, since I do not have a Form 2555. And 12a2 is particularly problematic, since my "Total foreign earned income (FEI) less related deductions" should be many thousands of dollars, not 0. This then seems to lead to 12a3 having the value 1, when it should have the value 0. And the problems compound from there.

Any suggestions on how to get TurboTax to fix this?

Thanks

[MarilynG1]

The maximum amount of the foreign tax credit is the amount of foreign taxes paid or the U.S. tax liability on the foreign income — whichever is lower.  Since we can't see your return in this forum, you stated that you entered foreign income, plus definitely related expenses.  If this was for foreign rental property, don't include depreciation as an expenses and see if it makes a difference in your FTC amount.

The calculation for FTC is complex and uses different amounts from your return.  When entering foreign income, use the amount that was actually taxed by the foreign country.  In that case, entering expenses is not necessary.  You're not trying to calculate foreign income here; in the case of a rental, you've already done that on Schedule E.  

The program performs the computations on lines 12a3, 12a4, 12a5 only for the General category of foreign income; if you selected 'passive' income (which would include rentals), and did not have Form 2555 for FEIE, these numbers would not apply and are not used in calculating your Foreign Tax Credit amount.

How does your actual FTC on Line 35 of Form 1116 relate to the amount of foreign tax you paid?

Here's more info on Claiming the Foreign Tax Credit. 

@akrawitz