Form 1116 Schedule B is not a/v this year for e-filing (for foreign tax credit carryover to next year)

It is scheduled to be available on 3/31/2022.

See https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_online_individual.html

Hi @Anonymous_ from the link you sent me, I see this:

Yes, @marcuscato, because that form will be print only.

@Anonymous_ Should I just zero-out the foreign tax credit carryover in TurboTax's "foreign tax credit computation worksheet" so that it does not attempt to generate 1116 Schedule B? The foreign tax credit carryover is about $100 and I would rather give that up than go through the stress of switching to another CPA/software. The issue is I cannot see what forms TT attempts to generate until I make the payment for Turbotax. Also, even though it lets me zero-out the "Foreign Tax Credit carryover" but not the "AMT carryover" (uneditable) and I am not 100% sure about the difference. As long as TT does not attempt to generate 1116 Schedule B I am fine to give up on the two carryovers (both around $100).

Yes, you can choose a deduction rather than a credit and doing so should eliminate the current issue.

@Anonymous_ I was not referring to a deduction. I still want to take the credit, but just skip the carryover of the excess to next year, by not filling the Schedule B, 1116. I will still file the regular 1116 (credit for this year). Is that allowed? IRS theoretically should not mind, given I am foregoing my credit for next year, but I wonder if their software sees this as a glitch and rejects my filing. Also, wrt deduction - if I took that option would it make the entire return as itemized? I have never filed itemized returns before and wanted to avoid another rabitthole.

I have the same scenario, personally, and just have decided to forego the credit; it is simply too big of a pain for too little of a return.

As a result, I opt for the deduction, but that has absolutely no impact since my itemized deductions have not exceeded the standard deduction for several years now (thanks, in large part, to the TCJA (tax reform)).

In short, your return would not be "itemized" (and you could elect to take the standard deduction, regardless, since TurboTax gives you that option).

I hear you @Anonymous_ I tried the deduction method you suggested, but it did not give me a single dollar of reduction in my taxes which basically means I being double-taxed both in USA and the foreign country - is that what you experienced too? I was willing to forgo the ~$100 of carryover for next year, but to forgo the entire ~$400 in tax credit is a bit hard to swallow (both financially and on principle).  Sad state of foreign tax laws indeed.  I guess my choices are: a) get this return filed w/ a CPA (may not be wise given the CPA fee will eat up the ~$400 not to mention the loss of time looking for a good CPA) or go w/ another software (not sure which other software is good out there). Or wise up and just suck up the loss of ~$400 and call it a day. Any other out of the box options?

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@marcuscato wrote:

I hear you @Anonymous_ I tried the deduction method you suggested, but it did not give me a single dollar of reduction in my taxes which basically means I being double-taxed both in USA and the foreign country - is that what you experienced too?

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Yes, that is definitely an issue with this approach.

For me, fortunately, the dollar figure was much smaller. 

Beyond that, the obvious choices are to wait, then print and mail the return or use other software (the latter might be a crapshoot where you could wind up in the same position).

Has anybody tried to just zero out the excess carry over to next year in the form 1116 worksheet and tried e-filing? Did IRS accept? That way, at least you get a higher refund this year in comparison to taking the foreign tax credit as an itemized deduction. The con is that you lose the excess carryover and cannot claim them in subsequent years. Also, I am not sure if overriding the excess carryover to zero has issues with the actual 1116 generation, subsequent e-filing and IRS acceptance. cc @Anonymous_ 

The "Office of President" from TurboTax called me and let me know that even though *officially* the Form 1116 Schedule B is available for print-only (not e-filing) on Mar 31st, they are working to get everything implemented and make the form AND e-filing available by Mar 16th (no guarantees of course).  So, here are the options:

1) [F***K IT APPROACH] Use itemized deduction for the foreign tax credit (don't worry this will not convert your entire return from standardized to itemized). Con - this will lower your refund (only related to foreign taxes) given the itemized deduction lowers the income, not the tax directly like taking the foreign tax credit does.

2) a) [I AM FEELING EXPERIMENTAL APPROACH] Use foreign tax credit, but in the Form 1116 Worksheet, zero-out the excess carryover to next year. Your refund for this year will be higher compared to approach (1) but you will lose the excess carryover for next year (not entirely sure if there are other repercussions for subsequent filing). Also, I haven't tried the method to know if the Form 1116 is generated correctly w/ the override in the worksheet, or if there are potential issues w/ e-filing in the final steps, or the IRS simply rejects the return or flags it for audit or other issues.

2) b) [I AM FEELING EXPERIMENTAL APPROACH] Use foreign tax credit, but click on "Tools" on left-side panel and then view the forms and delete the form 1116 (this can only be done if your FTC for this year is <= $300). Your refund for this year will be higher compared to approach (1) but you will lose the excess carryover for next year (not entirely sure if there are other repercussions for subsequent filing). Also, I haven't tried the method to know if deleting Form 1116 does not cause issues with integrity of the whole return, or if there are potential issues w/ e-filing in the final steps or the IRS simply rejects the return, or flags it for audit or other issues.

3) [PATIENCE APPROACH] Wait until Mar 16th if you can. Con: Mar 16th deadline may not be met and you will get more frustrated and will be closer to the April tax deadline (especially if you do not want to forgo foreign tax credit or yield to postal mailing, and need to switch to a different software/CPA etc). Also, you will be the "beta-tester" of this newly implemented feature on a complex foreign tax form; may or may not increase your reject/audit risk w/ IRS if it is buggy.

4) [MONK-LEVEL PATIENCE APPROACH] Use the software as it stands today, fill the form 1116 Schedule B manually and mail it in.

5) [EXTEND YOUR TAX SEASON FOREVVVVAAA APPROACH] Do (1) for now then amend the return much later in the year when TurboTax has the 1116 Form Sch B ready for e-filing. Not sure if the amendment process will run into the glitch, given the changes are significant.

Love your answer... but still feel some deep frustration inside that I will not express here...

I have the exact same issue although the amount of carryovers are substantially higher. I am really hoping that TT implements the Form 1116-B calculations so that we do not have to file manually or go trial and error with equivalent competitor software...

I will be following this thread closely and report if I discover any fix to the issue. 

I understand your frustration - I am in the same boat as you. FYI, I added option 2b) just now (variation of 2(a)) to my previous post above. Just to note, "Form 1116" has been around for a while and TurboTax has supported it soon enough. However, the "Form 1116, Schedule B" was only introduced by IRS late into 2021. So, TT simply has had not enough time to catch up, implement the form logic, test it thoroughly, before introducing it to millions of its customers safely (I am a professional software engineer so I can understand the complexity involved). Foreign taxes is one of the most complex parts of the tax code, so implementation is not very quick. I am not defending TT, just pointing out that this is a sad consequence of changes introduced by IRS too late in the year. Also, even IRS cannot be blamed, given the tax laws are passed by congress. Even congressmen cannot be blamed caused most of the work is done by their staff/lobbyists. Given what I know/experienced, moving forward, I will avoid keeping foreign mutual funds and individual stocks & bonds in a taxable brokerage account (perhaps only restricting them to my 401K, IRA and other retirement funds). The complex forms and the carryover tracking & anxiety is simply not worth it. Even if this is supported really well by TT and you/TT diligent track your carryovers, not all of your carryovers may be applied to subsequent years given there is a max limit of FTC you can take in a year (dependent on your foreign income of that year, US income of that year, whether you owe taxes, and the total taxes owed), which means the strong potential of getting double-taxed on part of your foreign income despite your/TT's best efforts. The approach of investing in foreign stock/bonds is only worth it if and only if you think that foreign stock will do way better than equivalent US stocks to justify the potential double-taxation, carryover anxiety and tax filing tribulations. And I am willing to take a bet that nobody who cannot see into the future can predict that.

I'm getting more and more frustrated and annoyed with TT each year. This situation with FTC is unlivable. I pay money for a product that is "almost" complete?? Cannot use the convenience features of efiling (been doing this for at least 10 years?? )  due to limitations of TT?? I purchase the Premier version because I have investments, foreign investments - but it doesn't support investments?? Well it almost does...

WTF???

Peter

In the same boat here. It's extremely frustrating since this form was available for e-file last year. Is there a way to file a bug with TurboTax and request they add it for this tax season? From the responses on this thread it seems like a common problem.

@pruizjunco 

No, the form was not available to e-file last year - it didn't even EXIST last year. Schedule B of Form 1116 is new and it is THE IRS that can't accept the form via e-file, not TurboTax.  They didn't publish the form until after the e-file system was programmed for the year.  Since it's a brand new form, it isn't a simple thing to just pop it in the system (on either end).  

Good point, I re-checked my tax return from last year and it was reported as "Foreign Tax Credit Carryover Statement," not a separate schedule.

Thanks for this comprehensive response and for giving us a little hope that there is a solution for 2021.  This is probably an unfair question but asking anyway - what do you think the chances are that we will have an efile formB by middle of March?  Given all the options, waiting until middle of March to EFILE seems to be the only acceptable one.  All the others either costs us $$$$, costs us headaches or a possible IRS audit.  So if you had to put money on the middle of March "non-promise" what are the odds?

Thank you.

I just noticed that you got a call from "the president" with an iffy statement that efiling might be available for Schedul B. Today on March 7, I just spoke to TT help on the phone and asked to be connected to a supervisor. I was told that there will be no e-filing available for Form 1116 Schedule B.  This is what it says on the Forms Availability page. The supervisor only gave me the workaround to delete the whole Form 1116, go ahead and e-file, without the foreign tax credit, and then file an amendment with Form 1116 by mail after it is available to print.  This is not satisfactory at all. I have been told that FreeTaxUSA has this new Schedule B available to e-file.

Yes, as I said before, it was a lady from the "Office of the president", NOT the president himself/herself. I got the call after complaining on Twitter. As I mentioned in my post, there are NO guarantees, given "formally" on the website it says that Form 1116, Sch B won't be supported for e-filing. I am guessing if you just call the customer service line, you will be given the "formal" response, given they do not want to give you false hopes. The choice is yours - you can wait until Mar 16th and see what happens, or file sooner w/ deleted/adjusted-for-zero-carryover 1116 form or itemized deductions, and amend later, as you mentioned.

Form 1116 Sch B, Foreign Tax Carryover Reconciliation Schedule will be available on March 17, 2022, it is not supported for e-file.  It is not recommended to file an incorrect return and then do an amendment.  This will slow down the process of completing your tax return when considering how backlogged the IRS is right now.

• When will federal forms be available?

Schedule B (Form 1116) is used to reconcile your prior year foreign tax carryover with your current year foreign tax carryover. Taxpayers are therefore reporting running balances of their foreign tax carryovers showing all activity since the filing of their prior year income tax return.

@crsimon53

@Daffodill

[Edited: 03/07/2022 | 10:32a PST]

@crsimon53 No problem, I understand your worries. I don't know the odds of TT meeting the Mar 16th deadline - the lady from the "Office of President" said the engineering team is "aware of the issues given multiple complaints through customer service, social media etc" and they are "working as hard as they can to get the e-filing of form 1116, Sch B supported". So, all I can say is that there is a "non-insignificant" chance of the deadline being met. If you can bear to wait until around Mar 16th (plus N number of days as a buffer), I would do that. Note though, that given the deadline is mid-April, if TT does not deliver on the deadline or forgoes supporting the e-filing of the form entirely, then you must be ready to pivot to a different software/CPA, or forgo the FTC carryover part, or just file w/ TT w/ itemized deduction of foreign tax and amend later to get FTC. If it helps, the amendment is an easy process w/ TT. TT does not charge a fee w/ amendment. However, I am not sure if the amendment would hit any glitches, given it is still a new form. I have been through one amendment process w/ TT and it was smooth and free, though it was resulting from a corrected W2 which is pretty common. Hope this helps a bit!

 @DianeW777

how sure are you about the e-filing not being supported for Form 1116, Sch B? I was told by a lady at the "Office of President" that the e-filing of Form 1116, Sch B,  will be supported on Mar 16th (soft deadline; no guarantees). Are you saying TT is now forgoing this effort? Most people would rather just file, get the part of the refund (or pay their owed taxes), amend later (only after the original return has been processed and paid-out/refunded), than MAIL the original return in. What if the mail is lost and IRS never tells us? In case we owe money, we will be charged w/ penalties & interest. Also, the backlog is even more severe w/ mailing - paper returns are just sitting in trucks from last year. At least w/the amendment approach we get the refund of non-foreign income taxes back sooner. Amendment only delays getting the FTC which in most cases, is smaller part of the refund.

@DianeW777 Your response is not helpful and a bit tone deaf.  You've told us what we can't or shouldn't do and have not suggested a route that will work.  So what is your advice for working around this TT failure?