Foreign tax credit

Forum|Forum|5 years ago
September 24, 2020
2 replies
20 views

I have a taxpayer that has a foreign tax credit carryover due to no taxes paid in last several years. This year he has a big tax bill but the credit carryover is not being used. Am I not entering the information correctly?

Lacerte Tax

This topic has been closed for replies.

itonewbie

Level 15

There may be more than what you see on the surface.

At a high level, FTC for a particular basket of income can only be credited against tax on foreign taxable income within that category. If you have sourced the income correctly and the FTC has not expired, Lacerte should compute the limitation correctly.

By what you stated, it is possible that your client may have not only FTC carryover but SLL/OFL, both of which would be subject to recapture but neither of which is computed automatically by Lacerte. You would want to take a deeper look at the prior year returns.

---------------------------------------------------------------------------------Still an AllStar

D

DependableAuthor

Level 5

Thanks so much for your help.

sjrcpa

Level 15

Does he have foreign income this year? The carryover can only be used to offset tax on foreign income that is taxed by both the US and another country(ies).

Practically speaking, most people never use their carryover.

The more I know the more I don’t know.

itonewbie

Level 15

I have a slightly different experience with FTC carryover, particular with General Limitation, because there are opportunities for creating limitations for this category of income. There's also the question of whether FTC should be used in favor of FEIE in certain high-tax jurisdictions.

---------------------------------------------------------------------------------Still an AllStar

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