This is the first year since moving to the US that we have to do our taxes ourselves. Looking at the previous years tax return, we have unused foreign tax credit from 2013 and 2014. I'm trying to figure out how to add this to TurboTax, but my previous return has two forms 1116, one for 'Passive category income' and one for 'General category income'. Do I just combine these in TurboTax, or how should I fill it in? (I'm using the online version. Is this one of the cases where the downloadable version would be better?)
One additional complicating matter:
I sold US stocks in 2014 that required me to pay capital gains taxes in Sweden. I didn't have to pay them until end of 2015 after doing my Swedish tax filing for 2014. So I ended up paying foreign taxes for 2014 that are not present in my US tax filing for 2014 since they were paid after that declaration was done. Can I somehow enter them into TurboTax, or will it just be too complicated to be worth it?
Since you paid the taxes in 2019, include them as a payment as you go through the Foreign Taxes section.
If you have different categories of income (passive, general, etc.) you will need to add a Foreign Tax Credit Computation Worksheet for each category of income.
[Edited | 4/14/2020 | 11:59am PDT]
Since you paid the taxes in 2019, include them as a payment as you go through the Foreign Taxes section.
If you have different categories of income (passive, general, etc.) you will need to add a Foreign Tax Credit Computation Worksheet for each category of income.
[Edited | 4/14/2020 | 11:59am PDT]
Thanks, but this completely misses the first part of the question. My previous tax return has two forms 1116, one for 'Passive category income' and one for 'General category income'. Which one do I enter on the Carryovers screen? Or do I enter both?
Sorry for the omission. You need to enter the carryover for each income category separately. I've added this information to my original answer.
Great! Looks like I should just have continued on and it would have prompted me for it. Will give it a try.
The answer from TurboTaxIrene is incorrect. There is no option in turbo tax to click on a box for carryovers.
What version of TurboTax are you using? On the Deductions & Credits screen, under the Estimates and Other Taxes Paid section, do you see "Foreign Taxes"? Just to the right you will see a blue-outlined box that says either "Start" or "Revisit," depending on whether you've been in that part of the interview before.
Yes I went there and went through all of the questions. No where does it give an option "You will come to the Carryovers screen. Click the Yes box. (Screenshot #2)" This is on the online version.
What about carrybacks? What about when 1116 wasn't filed the previous year? Please see this question: <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4650059-how-to-handle-foreign-tax-credit-carrybacks-in-turbotax">https://ttlc.intuit.com/questions/4650059-how-to-handle-foreign-tax-credit-carrybacks-in-turbotax</a>
On a slightly different note, I have carryovers from TT 2014, but they were not transfered over when I started TT 2015 from the 2014 Form 1116 Wks. Do I have to enter them manually from here-on? If there is a transfer issue, you might want to alert the TT users of this failing this late in the tax year.
Even after entering the carryover, it doesn’t apply :( I can see from manual calculation that the carryover should apply. What should I do?
After I first replied on April 22 there were several replies back that seemed to offer a way to eliminate the error TurboTax was reporting for form 1116.
My tax situation was not complicated, on my 1099 DIV form as an amount in 1a Ordinary Dividends and equal amount if 1b Qualified Dividends. I also had an amount in box 7, Foreign Tax Paid, and box 8 contained the Country Name, Canada which I had entered while filling out the input to Turbo Tax.
The solution, one which was recommended was to go to Form 1116 where Turbo Tax had checked box B - Foreign Branch Income and I changed that to Box C - Passive Category Income, which was also confirmed in the IRS instructions for form 1116. I saved the Form 1116 and reran the Check which was now OK.
I do not think this was complicated and that to me Turbo Tax did not handle correctly!
I have now submitted my Federal Tax forms which were accepted by the IRS. The bad news is still have to pay the Tax Due Amount by May 17!
What if someone worked for a US company as an expat overseas in 2021 and received a bonus from the parent company in 2022 based on the 2021 performance overseas? Can the foreign tax credit be applied against the US Tax in 2022 even if no foreign tax was paid in 2022? Also there was no presence in the foreign country during 2022. And by the way, the normal compensation in 2018-2021 was also paid by the parent company and taxed by the foreign country in those years.
If you received a bonus and if no foreign tax was imposed on that bonus, you will not be able to claim the foreign tax credit against that income even though the preceding income earned prior to the bonus was taxed by the foreign country.
Sorry I should have mentioned that my question is whether I can apply the accumulated foreign tax credit carryover from 2021 or prior against the US tax owed on the bonus paid in 2022 and based in 2021 performance even if no foreign tax was paid on this bonus?
No, you cannot use the foreign tax carryover to apply against your US tax owed in 2022. This is specified in this IRS publication that says you cannot claim a credit for unused foreign taxes in a year to which you carry them unless you also claim a credit for foreign taxes actually paid or accrued in that year, meaning this year.
This is still a freshly answered topic, so I would like add a follow-up question.
"You cannot claim a credit for unused foreign taxes in a year to which you carry them unless you also claim a credit for foreign taxes actually paid or accrued in that year."
Does this mean I can carry over credit from 2021 forward to 2023, and if I claim, even the smallest, new foreign tax credit in that year (accrued or paid), only then I will be able to claim the carried over credit?
Yes, this is correct. You may carryforward the foreign tax credits for ten years. You can only only use the carryover in a year that you claim a foreign tax credit. So if you paid foreign taxes in 2023, the foreign tax credit will be applied in that year and any excess amount not claimed will be carried forward until used or expired.
@macingrabda