FTC and AMT

[nc001]

It seems on 2021 while doing FTC section, I selected the non-simplified method to compute 1116 form for AMT.

For 2021, 6251 says

'Is the first tax year since the foreign tax credit was claimed, was the Simplified AMT  Foreign Tax Credit Limitation Elected?'

    'This is the first year': not-checked, 'No': checked

'Elect to use the Simplified AMT Foreign Tax Credit'

    'No': checked

For 2022 and 2023, 6251 says

'Is the first tax year since the foreign tax credit was claimed, was the Simplified AMT  Foreign Tax Credit Limitation Elected?'

    'This is the first year': not-checked, 'Yes': checked

'Elect to use the Simplified AMT Foreign Tax Credit'

    'Yes': checked

6251 shows only when I'm in the form view. It doesn't show in my full records returns print out. Because I was not hit by AMT.

I think by mistake on 2021 I selected the non-simplified method. Other years I selected the simplified method.

First minor question is why it's 'This the first year' not checked in 2021? Interview process  did not ask for it. And those fields are not part of the official 6251. Is there a purpose for this field.

Second question is more important. Even if was not hit by AMT, 1116 for AMT appears on 2022 return (only in the forms view) and FTC carryover for AMT appears as well (also in the printout). So I guess if I ever get hit by AMT and need to use FTC, I'll use those FTC carryover for AMT

Isn't that wrong? If I didn't hit AMT in 2022, why should it matter my non-simplified method for FTC for AMT?

But I was not hit my AMT.

[DaveF1006]

Yes, report the 2022 AMT carryover amount in case if you need it at a future date.  This should only matter if you are hit with AMT at a later date.

[nc001]

If I was not hit by AMT before, why would it matter?

Instructions for 1116 only talk to choose the method for calculating FTC if you are hit with AMT

[SusanY1]

If you don't have the "AMT" version of the Form 1116 on file (especially the 1116-B for carryovers) and have AMT in the future, you would have to go back and recalculate all of the prior year returns that could have carryover amounts on them.  Therefore, by default TurboTax (and all other programs, as far as I know) figure both regular and AMT 1116 figures and include these with the return so that accurate information is available in future years as needed. 

[nc001]

THanks.. That would make sense if I was using the non-simplified method ('Simplified Limitation Election' in 6521 instructions)

But I have been doing the simplified election method. Except for 2021 by mistake (and that year I was not hit by AMT,  so I don't think it should count).

What is the logic? Keep track of the FTC carryovers  for AMT just in case one day I start being hit by AMT and decide to use then the non-simplified method?  I would have think that the first year that this happened carryovers reset and the FTC carryovers  for AMT would be the same than the FTC carryovers  for non-AMT

If so, anybody having to file 1116 and never being hit by AMT, should track this info for ever and ever just in case you ever have to do FTC and AMT.

Is there any IRS info that details this?

[SusanY1]

Yes, the IRS provides these details HERE under Alternative Minimum Tax - the IRS tells us we must prepare the schedules both ways.  It is also in the instructions for Form 6251 (in the instructions for Line 8, where it indicates we must attach both versions of Form 1116)

This is done every year that you file, and there is no reset of the carryovers if you hit AMT in a given year (as you may not have AMT the next year). This is one reason (no reset) that the two figures are tracked separately.  Carryovers are tracked and recorded on Form 1116B for ten years. 

This dual calculation is required every year by all taxpayers, whether they elect the simplified method or not, per IRS instructions.  The simplified election allows you to use the same foreign source income amount, but the allowed credit can still differ from the non-AMT amount (it may not, in your case, but it is still required to file both an AMT and a regular version of the form, each year.)
 

[nc001]

Thanks for the answer. I couldn't find anything under the 'Special issues' link you sent or in the line 8 section of 6251 instructions. Can you quote what you were referring to?

But I found some info in the 'Record Keeping' section of 6251 instructions:

"Keep records that show how you
figured income, deductions, etc., for the
AMT. (...) For example, you will need
to separately figure and track certain
carrybacks, carryforwards, (...)"

IT's not 100% clear, but you could argue it implies that carryovers are kept in 1116 AMT even if you are not hitting AMT.

But 1116-schB AMT and non-AMT are different because it's assuming the non-simplified method, right? Why?

[SusanY1]

Carryovers are kept in both AMT and "regular" tax whether or not you hit AMT.  You must prepare both forms, every year that you claim a foreign tax credit.  

The Line 8 instructions are a few pages, and those really only apply when you do have AMT.  

Directly from the special situations link under the Alternative Minimum Tax heading in the first link:  "You must prepare separate Forms 1116 to compute the foreign tax credit and foreign tax credit limitation for alternative minimum tax purposes"  [emphasis added]

Unless the election is made for the simplified method, it will calculate the other.  Once the election is made, it can't be revoked without permission of the IRS.  But whether it is calculating simplified or not, the AMT 1116 is required for all taxpayers claiming foreign tax credits.

 If you made the election and a year was calculated using the other method, you should amend the return for that year to have proper carryover amounts reflected on your 1116B. 

[nc001]

I understand " "You must prepare separate Forms 1116...", I just want to understand the specifics of the 1116-AMT carryovers. Relevant instructions for 6251 line 8 are under "AMTFTC Carryback and Carryforward ", that are fairly short and I don't see mentioned either.

I am not saying you are wrong, just that I don't see the rules explicitly mentioned, so perhaps it's defined some other place

For 2021 I marked AMT-non-simplified when TurboTax asked me for it doing FTC. But the next years I marked 'simiplified'. For 2022 I lied accepting it and saying that IRS had given me permission to change (not really a lie, since I was not hit by AMT of course). IRS had no knowledge of my 2021 choice.

Election seems to be reflected on 6251 internal field by Turbo Tax (as I described in my opening post).

IF you do a change of election from non-simplified to simplified, do you still have to use the carryovers from the non-simplified AMT-1116?  Even if you were not hit by AMT? How would the IRS know?

If I did an ammedment for 2021, result would be the same (since I was not hit by AMT). Only Turbotax internal file would change. And I guess I would have to redo 2022 and 2023 since Turbotax only take into account the previous years return.