What is Form 1116?
IRS form used to calculate and claim the Foreign Tax Credit for foreign taxes paid or accrued.
Definition
Form 1116 (Foreign Tax Credit) is used to calculate the Foreign Tax Credit, which reduces your US tax liability by the amount of income taxes paid or accrued to a foreign country. The credit is subject to limitations based on the ratio of foreign source income to worldwide income. There are different baskets (categories) for different types of income.
Who Needs to Know This?
US taxpayers who paid or accrued income taxes to a foreign country and want to claim a credit against their US tax liability to avoid double taxation.
Key Deadline
Filed with annual tax return; unused credits can be carried back 1 year or forward 10 years
Potential Penalties
N/A - this form is for claiming benefits
Related Forms
Common Mistakes to Avoid
- 1Not properly categorizing income into the correct baskets
- 2Claiming credit for non-creditable foreign taxes
- 3Not carrying forward unused credits
- 4Trying to use both FTC and FEIE on the same income
Related Terms
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