How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.
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Anonymous
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How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

 
13 Replies
DS30
New Member

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

The only real way to account for a foreign income tax refund related to prior year returns would be to go back and amend these prior returns.

Go back to your prior years and recalculate your foreign tax credit with the amounts reduced related to these foreign tax refund payments. If the only change is a change in the foreign tax credit carry forward amount, then do not file any amended tax returns but recalculation the foreign tax credit carryovers for the current tax year.

If your tax liability changes due to this reducing in available foreign tax credits in those years, then you will need to file amended tax returns and the reason for amending would be "refund of foreign taxes claimed as foreign tax credits".

Here is a link on How to Amend a Return You Already Filed

jhmaine42
New Member

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

The original Canadian taxes was $29,677  converted to US $ 23,866

In 2019, my client received a refund of $19,612 converted to US $ 14,816.

The new Canadian taxes $ 10,065.

I believe that I should converted the net taxes paid using the exchange rate on the date of the refund.

Help, this my first return of this nature

 

 

tygrtchr
Level 7

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

From your question, it sounds like you claimed the foreign taxes in the past two years to get a tax credit.  If you already CLAIMED the refunds, then you must go back and file amended returns for the past two years to show that those credits have been refunded.  Since a credit comes out of the total tax liability, you will owe the amount of the refund to the IRS. 

sivarajans
Returning Member

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

I reported the interest earned from the foreign country, under the 1099 INT section.

in the same entry, stated my foreign tax paid.

I took the allowable foreign tax credit, with some carry over.

 

Now I revived a refund of taxes paid from the same country. Where do I report this. Under “other city/state/ tax”? 
thanks

LinaJ2020
Employee Tax Expert

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

If you are referring to a foreign tax credit you have claimed in the past, you would need to amend that tax return.

 

You do not report on your 2019 taxes.

 

If you have claimed a foreign tax credit and now receive the foreign tax refund that was included in the previous calculation, you would need to amend.  I am attaching a post from DS30 for your reference.  I believe his information will help resolve your issue.  Click here: Foreign tax credit refund

 

@sivarajans

 

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revbling
Level 2

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

DS30 said that if the foreign tax refund only affects the carryover amount, then it is not necessary to file an amended return. I need some clarification here. I have lived in and paid taxes to a country in Europe since 2015. I did not claim any foreign tax credit for 2015, 2016, and 2017 because I owed no USA tax. I did not realize there was a carryforward provision. In 2018 and 2019, I recorded the foreign tax "paid or accrued" and offset this against a very tiny USA tax liability for each of those two years. Subsequently, I received large tax refunds from the foreign country, but i have still paid far more foreign tax than the two tiny USA tax liabilities already mentioned. I have all the documents to substantiate this. Can I simply make the lump sum adjustment in 2020 so as to make the total 2015-to-date carryforward correct? I owe zero USA tax for 2020, so I will not use any of the carryforward for 2020.  I really want to avoid filing amended returns. That is very time-consuming and expensive, especially since there will be zero effect on my USA taxes. Finally, the form seems to indicate that I can carryforward 10 years of foreign taxes paid. It that correct? Thanks!

MarilynG1
Expert Alumni

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

@revbling If you didn't claim a Foreign Tax Credit in prior years, you are correct that you can carryover the amount for 10 years.

 

However, deduct the amount of the refund of foreign tax you received from the amount of Foreign Tax Credit you claim on future returns. 

 

Click this link for more info on Foreign Tax Credit Carryover.

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revbling
Level 2

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

You wrote:  "However, deduct the amount of the refund of foreign tax you received from the amount of Foreign Tax Credit you claim on future returns."

 

Does that mean you are suggesting that I deduct any refunds from the previous year from the FTC of the current year? That seems to be what you are saying. That would mean not filing an amended return for the earlier year.

 

Can you also explain the definitions of "paid" and "accrued" in this context? For example, estimated taxes are "paid" in advance, but they are not necessarily the actual tax owed for that year. I only find that out after filing a return. This accounts for the refund issue. So does paid  literally mean what I physically paid in that calendar year? That was my interpretation of the requirement because otherwise I would never know what to record. Does "accrued" in this context mean, for example, that I have filed a return, received an assessment of the amount owed, not paid it before the end of the relevant calendar year, and made no previous estimated payments?  I know this must sound a lot like Bill Clinton asking for the definition of "is," but the precise technical meaning of those two ordinary words is not clear in this context. 

 

Thanks in advance!

DaveF1006
Employee Tax Expert

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

You can claim a foreign tax credit regardless on whether it is paid or not. It is permissible to claim even though these are accrued. They can be paid or accrued in 2020 in order to be eligible to claim.

 

Refunds means if you are repaid for foreign taxes you are claiming or have claimed. For an example, if you claimed a foreign tax credit in 2019 and got repaid, then this should be deducted this year. Similarly, if you received a refund for your foreign taxes in 2020, that should be deducted also. Simply, you don't want to be caught double-dipping.

 

in answer to what it means to pay or accrue.  Paid means paid. You paid these foreign taxes. Accrued means that the foreign taxes are declared but you will pay later.

 

 

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revbling
Level 2

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

Thanks to you and the previous expert who responded. This makes sense. I only questioned the definition of "paid" because estimated taxes paid in advance against whatever the current year's liability may turn out to be are, in the most literal sense possible, "paid" in that current year. As we know, however, the actual liability for that current year is only determined when filing the return in next year. Hence, the issue of refunds and the definition of "paid." If there is an additional payment required, then it is paid when I pay it, obviously. I will account for refunds as you stated, which is the only logical way of looking at it, and make sure that I am not double-dipping. Thanks again. My questions are answered!

Dom19
New Member

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

So have you arrived at the conclusion that DS30 is incorrect and that a prior year tax return never has to be amended for a foreign tax refund?  And that foreign tax refunds can just be offset against FTCs in future years.  This is my first year filing taxes abroad in France.  I expect that I might get a large tax refund in 2021 from France for taxes withheld from 2020 French paychecks, but I haven’t filed my 2020 French tax return yet.  And even when I do file, I won’t know the exact refund amount until several months after filing when I get the tax assessment from the French government.  But I want to file my U.S. tax return before the due date particularly since I will owe money to the U.S. this year and want to avoid penalties and interest.  I plan to report the French taxes actually paid in 2020 on my U.S. tax return for calculation of the FTC.

nikesyrena
Level 2

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

I see suggestions that you file an amended return.  Amended returns are to correct errors in prior returns.  Your prior return was correct as filed and does not have any errors and there is nothing to correct.  Report the income ( the tax refund) as a tax refund in the year that you get the refund.   

 

DaveF1006
Employee Tax Expert

How do I report foreign tax refund ? Received foreign tax refund from last two years which I claimed as tax credit during those years.

Actually report this as other income. 

  1. Go to federal>income and expenses>all income>>show more  
  2. Less Common Income> Start
  3. Miscellaneous Income,>start
  4. Other reportable income>start
  5. Next screen asks Any Other Taxable Income>yes
  6. The next screen will allow you to report the income with a brief explanation. Label it as Foreign Tax Refund.
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