Foreign Tax Credit (or deduction)
15
TAX-AIDE Foreign Tax Credit (or deduction) Form 1040 Line 47 Pub 4012 G-2 Pub 4491 Page 242 NTTC Training 2013 1
-
Upload
gabriel-livingston -
Category
Documents
-
view
28 -
download
2
description
Foreign Tax Credit (or deduction). Form 1040Line 47 Pub 4012G-2 Pub 4491Page 242. Foreign Tax Credit Interview. Always do a complete interview BEFORE starting the return Review prior year return – any FTC? Review 1099-INT, -DIV or K-1s – any FTC? If more than $300 ($600 MFJ) - PowerPoint PPT Presentation
Transcript of Foreign Tax Credit (or deduction)
TAX-AIDE
TAX-AIDE
Foreign Tax Credit (or deduction)
Form 1040 Line 47Pub 4012 G-2Pub 4491 Page 242
NTTC Training 2013 1
TAX-AIDE
Foreign Tax Credit Interview
●Always do a complete interview BEFORE starting the return
●Review prior year return – any FTC?
●Review 1099-INT, -DIV or K-1s – any FTC?
● If more than $300 ($600 MFJ) Discuss options with client May be better to go to paid preparer
NTTC Training 2013 2
TAX-AIDE
Foreign Tax 1099-INT or DIV
●Nonrefundable credit – 1040 Line 47
●1099-INT or 1099-DIV boxes 6 & 7
NTTC Training 2013 3
TAX-AIDE
Foreign Tax on K-1
●Box number varies by form
●Must be coded as passive income
● See back of K-1 for codes
NTTC Training 2013 4
TAX-AIDE
Foreign Tax Credit
●Nonrefundable credit No benefit if there is no income tax
NTTC Training 2013 5
TAX-AIDE
Foreign Tax Credit
● Simplified foreign tax credit method Foreign tax must be from 1099-DIV, 1099-
INT or K-1* ONLY (all others disqualify)
AND Total foreign tax is ≤ $300 ($600 MFJ)
● If not, cannot use simplified method
NTTC Training 2013 6
* K-1: tax relating to passive income only (interest or dividends)
TAX-AIDE
Excess Foreign Tax Credit
●No carryback or carryover of the unused credits with simplified method Line 47 credit exceeds Line 46 tax
●Client should consider full Form 1116 with paid preparer
NTTC Training 2013 7
TAX-AIDE
Foreign Tax Credit
● If simplified method requirements are met Link from Form 1040, line 47, to Form 1116
OR Add Form 1116
NTTC Training 2013 8
TAX-AIDE
Foreign Tax Credit – Form 1116
● Input amount in top of Form 1116 Can use scratch pad if multiple sources
●No other entries on Form 1116
NTTC Training 2013 9
TAX-AIDE
Foreign Tax Deduction
Too much foreign tax to use simplified method?May claim an itemized deduction for all the foreign income taxes (cannot split)
●Input amount on Sch A, Line 8 Describe as Foreign Tax
●No benefit if not itemizing
●Benefit of deduction is less than of credit!
NTTC Training 2013 10
TAX-AIDE
Foreign Tax Quiz
Jerry, single, has a mutual fund that reported $455 of foreign tax on 1099-DIV
What are his options?
a.Full Form 1116 with paid preparer
b.If itemizing, he can claim a deduction for the $455Simplified method is not an option!
NTTC Training 2013 11
TAX-AIDE
Foreign Tax Quiz
What if Jerry is married and that is all of his foreign tax for 2013
What are his options?
a.Claim the whole amount as a FTC (better choice)
b.If itemizing, he can claim a deduction for the $455
NTTC Training 2013 12
TAX-AIDE
Foreign Tax Credit or Deduction – QR
● Is there a foreign tax credit on the return?
●Was any foreign tax reported on forms 1099 or K-1?
● Is the total amount within the simplified method limits
●Verify correct credit shown on Line 47 or deduction claimed on Schedule A
NTTC Training 2013 13
TAX-AIDE
Foreign Tax Credit or Deduction – Exit Interview
● Show client where foreign tax credit was claimed Explain why no benefit (no tax)
●Or show where deduction was claimed Or explain did not itemize
NTTC Training 2013 14
TAX-AIDE
Foreign Tax Credit or Deduction
Comments?
Questions?
NTTC Training 2013 15
