"Paid" v.s. "Accrual" for Foreign Tax Credit form

[ewax]

I'm self-employed for many years and pay the majority of my tax at this point in quarterly installment payments to Canada and Quebec. But I always owe some extra money at tax time the following year. So I have tax I've paid within the tax year and then also tax payments I've made in the following year when filing my return. On the Foreign Tax Credit (FTC) form, you need to designate that the taxes you're claiming credit for were either "Paid" or "Accrual". My understanding of this is that "Paid" refers to payments made within the tax year and anything paid outside that tax year is considered "Accrual". And my understanding is that the IRS is extremely rigid about this and wants you to only choose one...forever! And if you want to change to another method, you have to either file a request to change it or amend your previous returns that used the other method...or both?

On my return for 2022, it was marked "Paid" but I'm questioning this because as I've said, I made payments within the tax year AND outside of it. But "Accrual" feels wrong also. An accountant is trying to get me to switch to "Accrual" and amend the previous return to also use it, but I wanted to get more advice about what makes sense here.

Thanks!

[nelsona]

It is always best to use accrued method, since you don't have to go back and correct for refunds. You simply report the tax that was determined for that tax year. If you use the Paid method, and you get a refund, you need to amend your 1116 form to subtract the refund. This also aligns better if you also file in Canada, since CRA only accepts the accrued method.