How do I know if I had a Carryback Adjustment?

[hellotax1111]

TurboTax is asking:

Do you have a 2021 carryback adjustment?

How do I know if I have one and where would I look?

Thank you

[JosephS1]

In all likelihood you did not have a 2021 carryback adjustment.  The best thing to do here is just answer no and continue on.  I am including a link below from someone else who posed the same question.  Be advised that one of the respondents was a bit terse but that does not take away from the fact that you should just answer no.  

The adjustment generally pertains to foreign tax credits from prior years.

What is a carryback adjustment?

@hellotax1111 

[hellotax1111]

Thanks @JosephS1 

Yes I actually had seen that post but it didn't explain the reasoning of how to verify how to determine if a carryback adjustment is needed. That is why I was asking for a more thorough answer. 

Would you have any thoughts on that?

[ThomasM125]

An adjustment would be necessary if the amount you orginally entered for foreign taxes changed for some reason, for instance if you were assessed more taxes or received a refund of taxes you entered previously on your tax return.

Here is the explanation given in TurboTax:

[skyfx]

The screenshot you attached concerns carryovers, not carrybacks (which is what the OP asked about). Would the potential reasoning for having to make an "adjustment" still be the same?

[LindaS5247]

In general, the answer to this "carryback" question is "no" unless you have foreign tax credits from prior years.

In some circumstances, a taxpayer can elect to carry back excess foreign tax credits to the previous tax year. A refund of tax paid in the prior year could be a result of this carryback, if your foreign tax credit exceeded your tax liability for that prior tax year.

Click here for additional information on the Foreign Tax Credit.

Please feel free to come back to TurboTax Community with additional information or questions or click here for help in contacting Turbo Tax Support. 

[skyfx]

Appreciate your response and everything you wrote makes sense, but it still doesn't provide a specific answer posed by the OP: under what circumstances would one have to make "a carryback adjustment" for the prior year (as shown below)?

@ThomasM125 

@LindaS5247 

[skyfx]

FWIW, according to ChatGPT, these are scenarios when you may want to make a "carryback "adjustment." The way I think of an "adjustment" is this: TT calculates that you have $x of excess foreign tax credit (that is, amount of foreign taxes paid is greater than the amount utilized in a given year). You then get to choose whether you want to carry that excess forward ("carryover") or back ("carryback"). My understanding is that, by default, TT does a carryover, so essentially the "carryback adjustment" is a way of telling TT that you want to carry back some of the excess instead. If someone could confirm that that understanding is, that would be great.

EDIT: see the following link for example reasons for carryback adjustments: https://ttlc.intuit.com/community/tax-credits-deductions/discussion/potential-typo-how-to-carry-back...

[DaveF1006]

Yes, you have the option to carryback some of the excess foreign tax credit in 2022, or carryover for the next ten years starting with Tax year 2024. . If you decide not to carryback your excess credits in 2022, the program will carry forward your credits for ten years by default.

Let me know if this answers your question.

@skyfx 

[NotAHappyUser]

The Inflation Reduction Act (IRA) allows a 3 year carryback of Investment Tax Credits (ITC). That is what that screen is for.

For Example: You acquire IRA assets this year that generate a 30% ITC. Your current income taxes are not enough to use all of the tax credits. The carryback adjustment is used in PRIOR years to AMEND your prior years taxes and get a refund.

Getting to the set up for IRA tax credits is reached through: Other business credits-> Investment credit

Getting to carryback of IRA tax credits is reached through: Other business credits->General business credits

Note: putting the extra info here so the next happy user can find it faster.