H&R Block and foreign tax credit

[RunningBum]

Sure, that makes sense to take the simple route then. However, if it's under $300 ($600 filing jointly) you don't have to fill out form 1116 as long as you meet a couple other criteria, which is sounds like you do. I think you can just take the credit as long as you have some taxes to use it again, and you can't carry it forward or back. Might be worth a quick head scratch to check.


https://apps.irs.gov/app/vita/content/24/24_02_005.jsp?level=international

 

[easysurfer]

Sure, that makes sense to take the simple route then. However, if it's under $300 ($600 filing jointly) you don't have to fill out form 1116 as long as you meet a couple other criteria, which is sounds like you do. I think you can just take the credit as long as you have some taxes to use it again, and you can't carry it forward or back. Might be worth a quick head scratch to check.


https://apps.irs.gov/app/vita/content/24/24_02_005.jsp?level=international

I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.

 

[theOAP]

Foreign taxes paid, alone, cannot be carried forward or carried back. Only excess Foreign Tax Credits (FTC), as computed on form 1116, can be carried forward/carried back.

Calculations for form 1116 include (but are not limited to) allocation of deductions (either itemised or standard), considered exchange rates, reductions, consideration of line 41, 1040 (even if $0), and calculation of the 'limitation' form 1116, line 21. Excess FTCs result from the FTCs available for credit as determined by form 1116, or as determined by calculation of the 'limitation', whichever is smaller.

 

[Texas Proud]

I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.

If you are using any kind of tax program I would think that it would say that it is better to take as a credit...

Heck, I just downloaded all my info from Vanguard and did nothing else... it was in the correct spot as a credit... too bad for me that I have zero tax liability so I do not get it....

 

[easysurfer]

If you are using any kind of tax program I would think that it would say that it is better to take as a credit...

Heck, I just downloaded all my info from Vanguard and did nothing else... it was in the correct spot as a credit... too bad for me that I have zero tax liability so I do not get it....

Yeah, TT says better to take the credit. I paid $62 FTC in 2016. Just selected credit instead of deduction and by doing so will save me $57 had I filed as deduction. Cool!

Pays to procrastinate about filing .

 

[jebmke]

I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.

ok, I was over by 50%. Two key strokes.

 

[LOL!]

I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.

If your mutual funds paid less than $300 in foreign taxes then you do not even file Form 1116 to claim the foreign tax credit, you just claim the credit. I don't see why in that case one would want to claim the deduction instead of the credit. Besides, you may be taking the standard deduction and not itemizing anyways.

 

[gerntz]

I paid $1103 in foreign taxes, but cannot take the credit this year because I have no taxes to take the credit against.

That doesn't seem like a good thing. Water over the damn, but seems you'd want to have taxes to pay to use this.

 

[RunningBum]

That doesn't seem like a good thing. Water over the damn, but seems you'd want to have taxes to pay to use this.

Read on, I was able to carry most of it back to last year, and will carry the rest forward to some future year.

This was the result of limiting income to get an ACA subsidy. So even if I hadn't been able to use the credit in other years I would've come out ahead, but just barely.

 

[RunningBum]

One more gripe about H&R Block software and form 1116. As I said before, since I owed no taxes this year, I was unable to take the Foreign Tax credit this year, but I did carry it back to 2015 by filing an amended 2015 return.


I just got a letter from the IRS returning the amendment, because I did not add Form 1116 in my 2016 return. Meaning, the H&R Block software did not include it, presumably because the bottom line of the form for 2016 was 0. But the carry over/carry back to other years is from another line, so you have to file the form anyway, otherwise the IRS doesn't see what you are trying to carry over or back.


Why didn't H&R Block file it for me? Now I have to file an amended 2016 including Form 1116, and re-file my amended 2015. More work, and it delays my refund. This would've been tough for me to catch, because the saved .pdf of my return includes it, probably due to saving the return with supporting forms.


I don't know for sure that TurboTax would've filed form 1116, but this was the final strike against H&R Block. I found it harder to use, the .pdf version of the return isn't indexed like TT does, and now this omission, which I consider an error.

 

[Texas Proud]

One more gripe about H&R Block software and form 1116. As I said before, since I owed no taxes this year, I was unable to take the Foreign Tax credit this year, but I did carry it back to 2015 by filing an amended 2015 return.


I just got a letter from the IRS returning the amendment, because I did not add Form 1116 in my 2016 return. Meaning, the H&R Block software did not include it, presumably because the bottom line of the form for 2016 was 0. But the carry over/carry back to other years is from another line, so you have to file the form anyway, otherwise the IRS doesn't see what you are trying to carry over or back.


Why didn't H&R Block file it for me? Now I have to file an amended 2016 including Form 1116, and re-file my amended 2015. More work, and it delays my refund. This would've been tough for me to catch, because the saved .pdf of my return includes it, probably due to saving the return with supporting forms.


I don't know for sure that TurboTax would've filed form 1116, but this was the final strike against H&R Block. I found it harder to use, the .pdf version of the return isn't indexed like TT does, and now this omission, which I consider an error.

I always look at the form for filing to see what it includes... I do not like the supporting forms as there is a bunch of junk in the middle and I cannot see what the IRS is getting...

 

[LOL!]

I don't know for sure that TurboTax would've filed form 1116, but this was the final strike against H&R Block. I found it harder to use, the .pdf version of the return isn't indexed like TT does, and now this omission, which I consider an error.

I look forward to your gripes about TurboTax in about a year.

I've used both and when it comes to Form 1116, they both leave a lot to be desired.

 

[RunningBum]

I always look at the form for filing to see what it includes... I do not like the supporting forms as there is a bunch of junk in the middle and I cannot see what the IRS is getting...

I realize that now, but I'm not sure I would've detected the missing form. It's a lot easier to spot something that's wrong than to spot something that's missing. Looking through a deck of cards, the 11 of hearts would stand out a lot more than noticing that the 5 of clubs is missing.

And if I did notice it missing, I don't see a way to force the program to electronically include a form it didn't think it needed to include. I think I'd have needed to file a paper copy and print off 1116 along with the other forms. I don't consider that acceptable.

If your cap gains and losses perfectly balanced out to 0, I would hope they still would include Schedule D even though it has no impact to taxes. The IRS will flag it because they'll see the transactions on a 1099-B. It seems nearly as obvious to me that if you paid foreign taxes, the program should always include Form 1116 (unless the user explicitly chose to take the deduction over the credit) even if the bottom line were 0 because of the option to carry the credit forward or backward.

 

[RunningBum]

I look forward to your gripes about TurboTax in about a year.

I've used both and when it comes to Form 1116, they both leave a lot to be desired.

I've used TT for Form 1116 in the past and it wasn't easy but it was better than H&R B. In past years I've always been able to use the credit so I haven't had this situation to see if it still filed the form. Next year I'm likely to not be able to take the credit so we'll see what happens. If I get bored I might try a scenario using the 2015 TT that I have.

 

[Texas Proud]

I realize that now, but I'm not sure I would've detected the missing form. It's a lot easier to spot something that's wrong than to spot something that's missing. Looking through a deck of cards, the 11 of hearts would stand out a lot more than noticing that the 5 of clubs is missing.

And if I did notice it missing, I don't see a way to force the program to electronically include a form it didn't think it needed to include. I think I'd have needed to file a paper copy and print off 1116 along with the other forms. I don't consider that acceptable.

If your cap gains and losses perfectly balanced out to 0, I would hope they still would include Schedule D even though it has no impact to taxes. The IRS will flag it because they'll see the transactions on a 1099-B. It seems nearly as obvious to me that if you paid foreign taxes, the program should always include Form 1116 (unless the user explicitly chose to take the deduction over the credit) even if the bottom line were 0 because of the option to carry the credit forward or backward.

I am a bit surprised that it would not include the info even if it did not have impact... the H&R program put an IRA form in ours that had zero tax effect.... but it did have the info that was necessary for the return...


I do agree that it would be easy to overlook... I am working on an amended return for my sister who I prepare a return... when I was looking over this year compared to last year I noticed her last year return had the ACA penalty.... and she is in her 70s and has two insurance plans!!! I do not remember what I filled out for it to give her the penalty and did not notice it for some reason... but the two years were similar and when looking it stuck out like a sore thumb....

Oh well....

 

[meierlde]

Note since the rules do not require 1116s for foreign taxes reported on 1099s (or K-1s) unless you want to do the carry back, most tax programs do not generate them. (Actually makes sense the IRS does already have the information, so no need to input it a second time)

 

[Sunset]

The entire foreign tax calculation is pretty complex and a pain to do. I'm sure the IRS loves it as probably many folks miss it, or skip it due to the complexity which occurs if you pay foreign taxes beyond the little bit mutual funds include.

 

[jebmke]

Note since the rules do not require 1116s for foreign taxes reported on 1099s (or K-1s) unless you want to do the carry back, most tax programs do not generate them. (Actually makes sense the IRS does already have the information, so no need to input it a second time)

If you exceed the $300/600 simplified method threshold then a Form 1116 is required.

 

[audreyh1]

If you exceed the $300/600 simplified method threshold then a Form 1116 is required.

Yep

 

[RunningBum]

If you exceed the $300/600 simplified method threshold then a Form 1116 is required.

Yes, mine was over, and I also filled it out. The form is present, it just wasn't submitted electronically with the return by the program.

 

[MichaelB]

This is an important heads up. Also, you only have 3 years to refile, and if the missing form 1116 goes back that far, sool.

How does one determine exactly which forms were actually filed with the e-file?

 

[RunningBum]

This is an important heads up. Also, you only have 3 years to refile, and if the missing form 1116 goes back that far, sool.

How does one determine exactly which forms were actually filed with the e-file?

The way I've found in H&RB is to do Print, and under "Select What to Print" choose "Official Return". This shows you a list of forms that will be printed, and presumably, e-filed.

 

[RobbieB]

TT took care of it for me, I was limited too. It printed the form but I had to mail it to Austin TX office.

 

[jebmke]

Yes, mine was over, and I also filled it out. The form is present, it just wasn't submitted electronically with the return by the program.

Normally it take some manual work to complete the form correctly. I have used 5-6 tax packages over the years and none of them can prepare this form automatically. They all populate some of the lines but not all of the data is there. For many returns, it is necessary to complete the state income tax return before doing 1116.

If your (passive) FSI is < $20K it is only moderately complex. Once your passive FSI hits $20K it can get very involved.

These are some of the reasons why people hate this form so much. I can't really blame them. It should be a lot simpler.

 

[jebmke]

I haven't filed 2016 yet but I have completed the return in HRBlock Deluxe. Out of curiosity I went in an printed a PDF of a "return to file" and the 1116 was there.

Maybe it doesn't print/file if the form isn't complete.