I have a small (price of a weeks grocery bill) foreign tax credit from a 1099-Div from VG.
But due to itemized deductions, my taxes are at 0 with a full refund.
Since my tax bill is zero, do foreign tax credits carry over?
TTax gave me the option to include them in the itemized deductions (which wouldn’t do anything) or to get a credit against taxes paid.
They list Form 1116 isn’t ready yet from the IRS.
Can a foreign tax credit be carried forward for future years if you don’t have a US tax liability for the current year?
Yes, this can be carried forward for use in a future year. I see it all the time on my clients. See the bottom of page 23 on this publication for details.
With small amounts of foreign taxes, you have the option to claim the credit without filing form 1116. If you take that option, any unused credit does NOT carry over to the following year.
So be sure that you include Form 1116 with your return so the unused credit will carry over.
I like these books (the Link) so much better than the online IRS page.
When looking on the IRS website for a particular publication, look for the page that says “About Pub xxx” That usually gives you a link to both the book form (PDF) and the website form (HTML).
With small amounts of foreign taxes, you have the option to claim the credit without filing form 1116. If you take that option, any unused credit does NOT carry over to the following year.
So be sure that you include Form 1116 with your return so the unused credit will carry over.
While you can use Form 1116 to determine a carryover of the foreign tax credit, when you see the complexity of completing the form, you’ll think twice about taking this route.
I like these books (the Link) so much better than the online IRS page. Guess I’m just a book person.
If you know the publication or form number, the IRS template for finding the pdf version of a document is typically [p/f/i]xxxx.pdf, where p=pub, f=form, i=instruction, and xxxx is the number. Schedules are often, but not always, found by appending “sx” to the form/instruction name, where x is the schedule letter. The documents can be found at irs.gov/pub/irs-pdf/[filename].
For other folks using TTax requiring this form, the TTax website lists that it expects it to be available Feb 17.
If you have any income coming from a partnership, S-Corp, or foreign rental - the necessary K-3 documents that you need to complete Form 1116 won’t be available until mid-March at the very earliest and probably much later based on latest IRS timelines for approving e-filing of those forms.
(Latest guidance for 1065 K-3 is March 20, 1120-S K-3 is mid-June, 8895 K-3 is January 2023)