Foreign Tax Credit Carryovers

[kevinbaker2275]

I am new to Turbotax. My prior tax returns were done by a CPA who I am no longer able to afford.  In the last tax return, it appears I had a Foreign Tax Credit of $6,750.   This is noted in the "Foreign Tax Foreign Tax Credit Carryover Utilization Worksheet". I have a couple of questions: (1) What is the Foreign Tax Credit and how can I use it?; (2) Do Foreign Tax Credit's expire?; (3) If I don't use it for the next year, can I use it in a subsequent year? Thank you!

[KarenJ2 · Accepted solution]

1.  If you paid or accrued foreign taxes to a foreign country or U.S. possession and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes.  Foreign tax credit is used to offset double taxation.

2.  If you can't claim a credit for the full amount of qualified foreign income taxes you paid or accrued in the year, you're allowed a carryback and/or carryover of the unused foreign income tax. You can carry back for one year and then carry forward for 10 years the unused foreign tax. For more information on this topic (including taxes paid or accrued in years before 2007), see Publication 514, Foreign Tax Credit for Individuals.

3. Yes, if you do not use your foreign tax credit carry forward this year, you can use it in the next 9 years if you have foreign earned income (foreign business trips, for example).

[MBurroughes]

My error message is (Form 116 Comp Works) Foreign Tax Credit Wks- Total incoming C/O should not have a value Include this amount on the first copy of this category of income?

Huh? a $39 value appears on line 10 (Part III Foreign Tax Computation and then lower on the Foreign Tax Credit Carryovers.  No idea where it come from nor how to "include this amount on the first copy of this category of income. For $39 I'd delete but cannot determine either how to or how to "fix"

[LinaJ2020]

I would suggest you consider our new product / features TurboTaxLive to file your 2019 taxes.  This way you could have one of our tax professionals to review your tax forms. 

To reach one of our tax professionals, in the TurboTax program, once you complete your taxes, before you file, you’ll be given the option for a final review of your return by one of our experts.  After they completed reviewing your return, they’ll inform you of any proposed changes.

Here are the instructions:

From <https://turbotax.response.lithium.com/console/agent/4041379?>

@MBurroughes

[svillareal1]

I moved back to US mid-2018, applying some of my FTC (foreign tax credit) with a carryover balance.  Now in 2019 tax year, my tax residence is US and no longer get paid (wages) abroad.  However, i do have a 1 week business trip abroad and i have seen this can be considered foreign-sourced income that can release some of the FTC carryover balance.  I completed form 1116, with general income in 1a as business trip income;  calculating this by breaking my salary over that period.   This ultimately give a positive value on line 21 (form 116) for max amount of credit allowed and Part IV L33 shows the same FTC credit value.  My tax amount due is reduced accordingly.  This seems good, but I notice that FTC carryover sheet still shows zero in 2019 (foreign taxes, Disallowed, Utilized, Carry Over).  But the final line, Carryover to 2020 shows the subtracted amount reported on line 33 (form 1116).  If i right click on the zero, and click Data Source, i points me to the cell that in L33 (form 1116) which is the carryover amount.

Questions

1 - are i correct in subtracting a business trip in this way to release some FTC carryover?

2 - is there a bug that is not updating the 2019 FTC carryover utilization and reporting.

[sfviolins]

Hi!

I moved back to the US in 2017. If I have carried over foreign passive income credit on foreign taxes from an earlier year and I’m taxed this year by the IRS on foreign capital gains that I was not taxed on by the source country (Canada) due to a tax treaty, can I claim the carried over credit amount? Basically, am I allowed to fill out a form 1116 that has a $0 amount in Part II? @KarenJ2 

[rayeng]

If I have a carry over( ex.200$) for 2018 and I f I do not want to input ( and skip) the figure (in Line 10 ) of F1116 in 2019 return,can I still claim the again ( line 10) F1116 in 2020 return?

Or

since I have not provided this carry over info' input in 2019 F1116 line 10, do I  Iose this benefit of imputting in 2020 return(form F1116 line 10) and once for  all forego this 200$ carry over benefit.

(It is not clear from instructions of line 10 F1116 and where general info' says if you do not file form F1116 you lose using  carry over but I I will be Filing F1116 for 2019 but not using carry over --since Credit allowed will be zero for 2019 any way).

Thanks for any clarification

[Anonymous]

what's so hard about entering one number?   I don't think anyone can say for sure whether the IRS would raise a question when you file 2020 entering the 2018 carryover when you entered nothing in the 2019 return.  what happens if you can't use it in that year? current year FTC's are used before carryovers.    if the IRS does raise an issue then you may be required to file an amended return. 

to be brutally honest over the years  I've have worked on hundreds of returns with FTC carryovers. I can remember only a few where they ever got to use any of the carryovers. In my experience, 99% expire without ever being used. 

[rayeng]

Thank you so much for your answer.

The other main concern I had was that for this year - 2020, I don't have any foreign income so I don't need to file Form 1116  with my tax return. In such circumstance, when the foreign income and taxes are $0 do I still need to file the form 1116 with just line 10 (for carryovers balance ) or fill out any other type of statement?

Eagerly waiting for your advice..

Thank you again, 

[SivaTTax]

I have foreign tax credit from previous years. For the current year, I have foreign income that i am reporting and including US tax, however I paid less tax in that foreign country.  Turbotax still does not take the previous year's unused tax credit to enable to me take full tax credit against what I am paying as tax for the foreign income .  The column has 0 values although I have entered the used credit amounts in the right places - it shows the right amt as unused but shows 0 as carry over amount to be used for current year.  Any help on how to fix it would be great.

[feiwenw66563]

I have foreign tax carry over amount from last year. Which line of amount i should use from Form 1116:

Regular section: Line 9: Foreign Tax or Excess Limit Remaining 

Or 

AMT section: : Line 9: Total Foreign Taxes from all available year to be carried to next year

[SivaTTax]

Line 10 F1116 for all category

[feiwenw66563]

Form 1116 Line 10 is blank, but the foreign carry over statement shows $3000 for next year. 

[DaveF1006]

It means you were not able to claim the non-refundable portion of your Foreign Tax Credit for this year because there was not enough tax liability to take full advantage of the credit.

[rmbu]

On form1116 line 33, I have smaller number than on line 32, which means I should have more Foreign Tax Credit than total tax amount this year, so should have excessive FTC. However, in TurboTax "foreign tax credit carryovers to 2021" worksheet, I see it utilized all the foreign tax for 2020 and there's 0 carryover to 2021. How can that be the case?