Get 1999 Instructions For 1116

Using Form 1116 Explanation Statements to Amend a Foreign Tax Credit. Another common use for a Form 1116 explanation statement is to amend a Foreign Tax Credit you've claimed on a previous tax return.

Excess credits can be carried back one year and carried forward ten years. Credits carried back can only offset taxes paid in the previous year, and any remaining excess is carried forward. The general foreign tax credit limit (which is based on total foreign income) applies to carried-back and carried-forward credits.

The foreign tax credit is a U.S. tax credit for income tax paid to other countries. The general objective is to help taxpayers avoid double taxation on foreign income. Taxpayers can deduct the foreign income tax they paid or claim those taxes as a foreign tax credit.

You provide detailed information using each of the form's four sections: Part 1 to calculate taxable income from one to three countries. Part 2 to list taxes paid in both the foreign currency and their U.S. dollar equivalent. Part 3 to figure the FTC for the income category.

To choose the foreign tax credit, you generally must complete Form 1116, Foreign Tax Credit and attach it to your U.S. tax return. However, you may qualify for an exception that allows you to claim the foreign tax credit without using Form 1116.

Use form FTB 3540, Credit Carryover and Recapture Summary, Part I, to figure a prior year credit carryover of one or more repealed credits that no longer have separate credit forms. Credit carryovers may not be carried back and applied against a prior year's tax.

Accumulating Carryovers on Foreign Income The Foreign Tax Credit can only be applied against foreign income. This means the only way to use up carryover credit would be to move to a country with lower taxes than the US.