Foreign tax credit carryover

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I have a foreign tax credit carryover from 2022 (Form 1116 Schedule B line 8 column xiii). This was successfully transferred over and shown on Form 1116 line 10 when I first started working on 2023 taxes in December.  Something happened in the last couple days that made that disappear. It may have been a software update, or it may have been my revisiting the Foreign Tax Credit interview to consolidate all RIC entries into one.

I can manually enter the carryover into Foreign Tax on Form 1116 Line 10, but I'd like to figure out what happened to the transferred carry over from last year. If I look at the Federal Carryover Worksheet, there is no handling of Foreign Tax Credit in the Credit Carryovers section. Where do I look to see what was transferred from last year, and any ideas of why it disappeared?

[DaveF1006]

It depends. Foreign tax credit carryovers can disappear after calculating in a 1040 return using the forms mode rather than entering information in the interview mode. This happens because of missing information in a section. Here is how to enter a proper flow of information in ensure this doesn't happen.

1. Go to federal>deductions and credits>estimate and other taxes paid
2. Foreign taxes >start
3. Start answering questions. Make sure you answer the question correctly about if this is the first year you are making the simplified  election
4. Answer the questions in the next screens until you reach a screen that talks about income type.. if you have more than one country, you will add that later.
5. Next screen is where you add the country your foreign income was earned in. 
6. Next screen will ask you what your source income earned in that country. Here you will allocate income earned while you were in that country.
7. You will continue answering questions until you get to a screen that says foreign taxes paid to XXXX. Be sure not to list a date at the bottom beyond 12/31/2023 or you won't get the foreign tax credit and will show up as an error in your return
8. There will be a carryover screen that will appear in the interview. The amount carried over from a previous year should be recorded automatically here if you prepared your return in Turbo Tax in  previous year. If not listed here, you may add the amount from your 2022 (Form 1116 Schedule B line 8 column xiii). 

I put these steps in because I wanted to stress the importance of not using the forms mode to prepare your return. As far as improper handling of your 2022 carryover credit, are you asking if the credit has been utilized?  If so, there may have not been enough tax liability in return to take advantage or your carryover credit as well as your Foreign Tax Credit for this year.

Let us know if you have additional concerns  as we are here to help.

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I really appreciate your response.

I went back through the Foreign Tax Credit interview but did not revisit the individual foreign tax entries. It told me I had used Simplified previously, and I must use it again (unless IRS permission) and ask if I wanted to use it again. I said yes. It then asked for carryover data, so I manually copied from 2022 Form 1116 Part III line 14 and line 24 as the Foreign Tax Credit Carryover 2022 foreign taxes and amount used. I do same for the 1116 AMT (although I didn't get hit with AMT last year or this year). At that point, everything works out the same as before the transferred from last year disappeared.

As a further sanity check, I started a new blank return and transferred from last year. The carryover numbers were properly filled in matching the entries I had made. So I think I'm good.

I hear your warning about forms mode. Shame on me, but I work primarily in forms mode but I now know that my 1116s were not as simple as they could have been if I had been using interview. Lesson learned. In fact, where I lost the transferred data was when I deleted my Forms 1116 and then ran interview to consolidate all RIC instances to one "country".

A side question here is if there is a place to view the transferred data. The Federal Carryover Worksheet doesn't have FTC carryover.