Question

How to fill out Reduction in Foreign Taxes in Form 1116? What is the difference between FEI Excluded Less Related Deductions and Total FEI less related deductions?

Forum|Forum|6 years ago
March 11, 2020
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Employee

Bring up the f1116 Comp. Wks. to the screen. Scroll down to Part 3- Foreign Tax Computation. Put the pointer over cell 12a1. Right click. On the box that comes up, click on the bottom cell which states "About excluded FEI-Dedns." Another box will appear with detailed info for each cell related to reduction in foreign taxes.

T

TSR-1407Author

Thanks but this is not working. I saw that you advised other users with the same solution last year. But none of them reported any success.

There is no box after right click, and the only way to bring up the form 1116 worksheet is to wait for the Review to find the error, saying line 12a1 must be entered.

I don't know what number is Turbotax looking for, since all gross income and expenses have already been entered.

K

KarenJ2

You cannot take a foreign tax credit on income that you have excluded by the foreign earned income exclusion as that would be double dipping. So you only need to complete this if you are using the foreign earned income exclusion.

So you must allocate some of your foreign tax credit to the foreign earned income and that amount will be disallowed.

For example, if your total foreign exclusion and foreign housing exclusion is $90,000 and your total foreign income is $200,00, the amount of foreign tax credit that you will not be able to use on your return is $90,000/$200,00.= 0.45.

If your foreign taxes were $50,000 , the Form 1116 will calculate that the reduction for foreign taxes is $50,000 * 0.45= $22,500. So the amount of foreign tax credit you can use is

$50,000-$22,500=$27,500.

This is calculated on lines 9-14 on Form 1116.

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F

Foreigner 12

What you are suggesting to do does not work. TurboTax does not have that logic built in. I had to reduce the amount of foreign tax paid fir the “double dipping”. The cells 12a1 and 12 a2 do not drive any formulas and the tax refund/due.