Form 1116 Carryover only?

Forum|Forum|2 years ago
March 12, 2024
1 reply
9 views

Client is an expat living in the UK with foreign income of $27k and foreign taxes withheld of $3k. Also has $11k of 1099 NEC income made from the US.

Form 1116 is only calculating a carryforward credit for all foreign taxes paid of $3k no credit for 2023. What could be the cause of this? Could it be because there was just 1099 income in the US? Client owes $800 for federal (I assume because did pay taxes on 1099 NEC income).

Would like to be able to fully explain to client why foreign credit did nothing for them this year.

ProConnect Tax

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sjrcpa

Level 15

Is the UK foreign income on the return?

Or, did you use the foreign earned income exclusion to exclude it?

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

T

tbamazeAuthor

Level 3

Only entered the foreign income on form 1116. So 1040 shows nothing related to foreign earned income or foreign taxes paid.

Did not consider entering as foreign earned income exclusion (form 2555) because thought form 1116 credit would be more beneficial. Is the recommendation to enter on both forms (1116 and 2555)?

First time doing one of these......

sjrcpa

Level 15

The income is taxable on the 1040 first. Then maybe you get the credit.

You cannot take foreign earned income exclusion and foreign tax credit on the same income.

The software is correctly calculating no FTC based on your input. But your input is wrong.

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

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