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I have Unused & Excess Foreign Tax Credit C/O. Pub 514 shows Unused + and Excess -. PTO not allowing entry for excess as -.Support says PTO does not differentiate.

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Level 1
last updated ‎December 07, 2019 6:42 AM

I have both Foreign Tax Credit Carryovers that are Unused and Excess. These are handled differently (Publication 514 shows Unused as + and Excess as -). The difference is apparently important because only Excess is allowed as a credit (no deduction, as I understand). I cannot find a way to differentiate these carryovers in PTO and their support team and supervision are telling me that the program does not do this. Since Publication 514 explicitly indicates these credits be differentiated. I find it VERY difficult to believe the program does not do it correctly. Anyone that knows how to enter these, I would greatly appreciate the help) FYI - PTO does not accept a - sign for the number so this simple solution is not the answer.


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Level 15
last updated ‎December 07, 2019 6:42 AM

PTO handles basic calculations for F.1116 without problems.  What PTO doesn't do and won't even give you any prompt or diagnostic for is where various adjustments are required by the Code and regulations.

If your "unused" means carryover from prior years that were not carried back, yes, they get applied to the current year when you have excess limitation and the carried forward amount is shown on page 2 of F.1116 regardless of whether it can be utilized.

If the foreign tax available for credit from the current year after applicable scaledown is larger than the limitation, the excess credit may then be carried back/forward.

With each F.1116, PTO generates a Statement that breaks down FTC carried forward from each of the last 10 years and how much of that is utilized to support the amount reported on page 2.  There is also another version of that in the Workpaper which breaks down the amount of credit available for carryback and carryforward.

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Highlighted
Level 15
last updated ‎December 07, 2019 6:42 AM

PTO handles basic calculations for F.1116 without problems.  What PTO doesn't do and won't even give you any prompt or diagnostic for is where various adjustments are required by the Code and regulations.

If your "unused" means carryover from prior years that were not carried back, yes, they get applied to the current year when you have excess limitation and the carried forward amount is shown on page 2 of F.1116 regardless of whether it can be utilized.

If the foreign tax available for credit from the current year after applicable scaledown is larger than the limitation, the excess credit may then be carried back/forward.

With each F.1116, PTO generates a Statement that breaks down FTC carried forward from each of the last 10 years and how much of that is utilized to support the amount reported on page 2.  There is also another version of that in the Workpaper which breaks down the amount of credit available for carryback and carryforward.

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Still an AllStar

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Highlighted
Level 1
last updated ‎December 07, 2019 6:42 AM
Thank you so much for your prompt response! My issue is showing the excess amounts. I cannot seem to get Proconnect to acknowledge which amounts are excess and which are unused (as unused are + numbers and excess should be - and only positive values are allowed in the carryover fields). It's just adding them all together and not actually using the excess C/O but increasing the unused amount.
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Level 15
last updated ‎December 07, 2019 6:42 AM
These should all be showing correctly.  Suggest you take a second look at the statement and workpaper.  If you need help reading them, please post images of the top part of page 2 as well as the tables from the statement/workpaper so that we can help you understand them better.
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Still an AllStar
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Level 15
last updated ‎December 07, 2019 6:42 AM
BTW, the form doesn't go by those + and - signs illustrated in the Pub.  Those are only there to help readers understand the mechanism.

All major professional tax products use similar presentation, including the most sophisticated ones such as GoSystem RS and ProSystem FX, which are used by Big 4 and international accounting firms.
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Still an AllStar
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Highlighted
Level 1
last updated ‎December 07, 2019 6:42 AM
An attachment has been added that might help the visual here. Please take a look and see if that explains things better than I have.
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Level 15
last updated ‎December 07, 2019 6:42 AM
That's because you didn't enter the numbers the way it works in PTO/Lacerte.  The 2017 statement includes information about excess limitation for each year, which I agree comes in handy but is not a requirement from a reporting standpoint; it is there only for reference.

While PTO/Lacerte doesn't provide any information about excess limitation in prior years (and it took a bit of getting used to that when I first started using it), you can still easily tell there is no room for carryback if there is an amount shown under the column "Foreign Tax Credit Carryover".

Now back to your question specifically.  Could you help me understand your client's situation a bit better?  Was (1) 2017 your client's first year in a fiscal year country (or a no tax jurisdiction) before any tax was assessed and a ***substantial*** amount of his foreign earned income couldn't be excluded by §911 or (2) your client resided in the US but traveled extensively for work overseas in 2017 or (3) your client exercised NQSO or had disqualifying disposition of ISO in 2017 and a large part of it was related to prior year assignment(s)?  The reason I asked is that it would otherwise be unusual to have such a large excess from 2017, particularly since there was no foreign tax paid (and any scaledown).

Assuming nothing is amiss, here's how you should have made your input -
Credits > Foreign Tax Credit C/O (1116) > General Limitation Income: Nothing since there are only excess limitations or FTC carryover.
Credits > Foreign Tax Credit C/O - AMT (1116) > General Limitation Income:  Since the 2017 statement doesn't show all the details, I'd make up some numbers to arrive at the same results just for illustration purposes -

If you were preparing a ***2017*** return in PTO, you'd make your entry as follows -  
2015
====
Foreign Tax Paid = $123,456
Foreign Tax Disallowed = $45,000
Foreign Tax Claimed = $53,852
Foreign Tax Carryover = $24,604

2014
====
Foreign Tax Paid = $112,050
Foreign Tax Disallowed = $52,427
Foreign Tax Claimed = $48,679
Foreign Tax Carryover = $10,944

Since the carryover from 2015 and 2014 were used up on the 2017 return, the C/O entries proforma'd (or manually input by you in the case) for 2018 would look like this -
2015
====
Foreign Tax Paid = $123,456
Foreign Tax Disallowed = $45,000
Foreign Tax Claimed = $78,456
Foreign Tax Carryover = $0

2014
====
Foreign Tax Paid = $112,050
Foreign Tax Disallowed = $52,427
Foreign Tax Claimed = $59,623
Foreign Tax Carryover = $0
   
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Still an AllStar
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Level 1
last updated ‎December 07, 2019 6:42 AM
Cx expat and worked extensively out of the country for quite some time. Recently returned to the US and no longer working out of the country but in the event there is foreign income to offset any carryovers, I'd like them to be utilized. Since for Regular purposes there is only Excess remaining - I wanted that in the return. For AMT, there is only excess remaining as a result of the 2017 Excess being greater than the Unused C/O from 2014 & 215.
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Level 15
last updated ‎December 07, 2019 6:42 AM
According to your attachment, there're only excess limitations for both regular tax and AMT.

The IRS does not refer to the statements for excess limitations but the actual F.1116.  We always get copies of at least the last 3 years' returns for our records and also copies of earlier years if we need to source income for stock options.

Having said that, only the excess limitation for 2017 is relevant and only if your client has excess foreign tax credit from 2018 to carryback.

"in the event there is foreign income to offset any carryovers" - Just to be clear, foreign-source compensation only creates limitation, which does not carry back or forward.

As for your client, I still think it is an unusually large limitation your client had in 2017 unless your client was in one of those situations described.  I would take a second look if I were you, especially if your client self-prepared.

Good luck.
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Still an AllStar
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Highlighted
Level 1
last updated ‎December 07, 2019 6:42 AM
This has answered my question. Thank you.
There should be no Foreign Income or Taxes (unless from dividends...) in 2018.
Client made nearly half mil each year working overseas and PWC did the returns so I am not surprised with the amounts.
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Level 15
last updated ‎December 07, 2019 6:42 AM
That's scenario (2).  Glad to be of help.
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Still an AllStar
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Level 15
last updated ‎December 07, 2019 6:42 AM
Also, taxes paid on dividends belong to the passive basket and not general limitation.
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Still an AllStar
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Level 1
last updated ‎December 07, 2019 6:42 AM
Thank you again for all of your input. It is appreciated.
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Level 15
last updated ‎December 07, 2019 6:42 AM
NP
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