Form 1116 FTC Part 2 “paid or accrued” selection

Forum|Forum|2 years ago
March 26, 2024
1 reply
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All my previously filed returns [Form 1116] had PAID selected. Can I change going forward to ACCRUED?

Seems cleaner to match up Foreign Taxes paid to the same year they occur (Accrued method) versus taking the credit in a future unrelated year (PAID). If I understand it right.

Respectfully,

CEM2

M

Mike9241

Generally, you can take a foreign tax credit in the tax year you paid or accrued the foreign taxes, depending on your method of accounting. If you report on the cash basis, you can choose to take the credit for accrued taxes by checking the “Accrued” box in Part II on a timely filed original return. You can’t make this choice on an amended return. Once you choose to do this, you must credit foreign taxes in the year they accrue on all future returns.

A

Anonymous

Thank you for the reply MIKE9241!

Based on that info and if I chose PAID not ACCRUED on Form 1116 part 2:

If 2023 is the first year I file a Foreign tax return and I paid the Foreign tax due in April 2024. I will not be able to take an actual FTC on my 2023 US Return. I will need to wait until 2024 to get the 2023 FTC since the 2023 foreign tax was PAID in 2024. Sound correct?

CEM2