Unused FTC credits from 2011 and form 1116

[Frankd1]

I decided on TaxAct software (download version) to file my wife’s IRS return for 2012 (USC in Canada as a PR).
So far everything is going well but I am curious about line 10 – carryback or carryover on form 1116 for 2012...TaxAct is asking about carryover..

2011 return was prepared by a CPA, this was the first time f1116 was used and we ended up with unused foreign tax credits for both gen limit and passive income. These are documented on a foreign tax credit carryover statement/worksheet.

scenario: foreign tax paid 2011: 3517 (gen), max credit: 2695, unused: 822
foreign tax paid 2011: 119 (pass), max credit: 91, unused: 28

For 2012: foreign tax paid: 3463 (gen), max credit: 2014, unused: 1449
foreign tax paid: 3 (pass), max credit: 2, unused: 1

1. I’m wondering if the unused credits from 2011 need to be shown on line 10 of the 2012 f1116 for the two different types of income? Or,

2. Line 10 for 2012 is left blank because the scenario for 2012 is the same as it was for 2011 – unused credits.
If this is the case then I would simply document the unused credits from 2012 on the worksheet the same way 2011 was documented.

I went through pub. 514 and from what I can tell by the examples it would seem that the unused credits from 2011 do not get entered on the 2012 f1116 (line 10) due to no excess limit for 2012. I would only be able to use the credits from 2011 in a future year (up to 10), if there was a year where I have an excess limit – max credit (limit) available is more than foreign tax paid.
The same goes for the unused credits from 2012 - they would apply to a future year that has excess limit, but only after the 2011 unused credits are used up first.

I just want to make sure that my understanding of this is correct..

[nelsona]

1. You only need to show carryforward if you are going to use it, which would only be if you use all of your 2012 foreign tax, and can still use more. Otherwise, you carry forward some of this years, and it all goes on your carryforward for next year, year by year until (a) you use it, or (b) it expires.

[Frankd1]

Thank you nelsona!

What I will do then is make note of the unused credits from 2012 and enter them into their own separate column of the carryover statement/worksheet - next to the 2011 unused credits column, and keep track of them that way....If we ever need to take advantage of the unused credits, then the credits from 2011 would be the first ones to be used up....up to their expiry of course

I suppose that there are no official worksheets for this, so I will use the one from last year and add another column - I think excel would be the best way to do this...I'm thinking the IRS doesn't care what the statement/worksheet looks like, as long as it is included in the event we have a year that requires a carryover to cover an excess limit, and they need to see the calculations..

Are there many cases of US Citizens in Canada who actually have the need to use carryover or carryback foreign tax credits? I would think that at least for people who have a relatively simple return, that they would always pay more foreign tax then the limit and end up with unused credits that end up expiring? I wonder...

[nelsona]

Your software is supposed to produce these carryforwrds sheets each year. Mine always did.

[Frankd1]

Right! I actually haven't printed anything off yet so I didn't see the worksheets.
I'm using TaxAct deluxe version....I think I can look under the forms tab and open up the file from there and it will show me.

I think part of my concern was that last years (2011) return was completed by a CPA and it was also the first year form 1116 was used. I was hoping to be able to import the 2011 return so that the info would jive with the 2012 return.
I am doing the return on my own this year and thought I would use software as per your recommendation.

I do have a paper copy of 2011 with all schedules and statements which should be good enough.

[graubart]

I back filed 2005 to 2010 at the end of 2011. I filed 2011 timely.

For my 2012 return I would like to include FTC carryover for the first time.

Should my worksheet contain 2012 carryover only or can I include one or more previous years?

[nelsona]

to USE carryforward from previous years, you first need a sheet that states carryforward availale for 2012.
Then after you have doen your taxes, you should have a sheet that says carryforward available for 2013 (that you will use next year).

[nelsona]

Its not really necessary to submit a worksheet with your return (or amend previous ones) if you are not using carryforward in that particular year, but as soon as you do, you need to start with the one from the previous year, use it, and then produce a new one for next year.

[nelsona]

That may be why taxact isn't producing a worksheet for one of our posters: he isn't using carryforward.