Publication 514
taxmap/pubs/p514-007.htm#en_us_publink1000224664You must file Form 1116 to claim the foreign tax credit unless
you meet one of the following exceptions.
taxmap/pubs/p514-007.htm#en_us_publink1000224665If you meet the requirements discussed under
Exemption from foreign tax limit,
earlier, and choose to be exempt from the foreign tax credit limit, do not file
Form 1116. Instead, enter your foreign taxes directly on Form 1040, line 47, or
Form 1040NR, line 45.
If you are a shareholder of a controlled foreign corporation
and chose to be taxed at corporate rates on the amount you must include in gross
income from that corporation, use Form 1118 to claim the credit. See
Controlled foreign corporation shareholder
under
You Must Have Paid or Accrued the Tax,
earlier.
taxmap/pubs/p514-007.htm#en_us_publink1000224666You must file a Form 1116 with your U.S. income tax return, Form
1040 or Form 1040NR. You must file a separate Form 1116 for each of the
following categories of income for which you claim a foreign tax credit.
- Passive category income.
- General category income.
- Section 901(j) income.
- Income re-sourced by treaty.
- Lump-sum distributions.
A Form 1116 consists of four parts as explained next.
- Part I—Taxable Income or Loss From Sources Outside the
United States (for Category Checked Above).
Enter the gross amounts of your foreign or possession source
income in the separate limit category for which you are completing the form. Do
not include income you excluded on Form 2555 or Form 2555-EZ. From these,
subtract the deductions that are definitely related to the separate limit
income, and a ratable share of the deductions not definitely related to that
income. If, in a separate limit category, you received income from more than one
foreign country or U.S. possession, complete a separate column for each. You do
not need to report income passed through from a regulated investment company
(RIC) on a country by country basis. Aggregate all income passed through from a
RIC in a single column in Part I. Enter "RIC" on line g of Part I.
- Part II—Foreign Taxes Paid or Accrued.
This part shows the foreign taxes you paid or accrued on the
income in the separate limit category in foreign currency and U.S. dollars. If
you paid (or accrued) foreign tax to more than one foreign country or U.S.
possession, complete a separate line for each. If you receive income passed
through from a RIC, aggregate all foreign taxes paid or accrued on that income
on a single line in Part II.
- Part III—Figuring the Credit.
You use this part to figure the foreign tax credit that is
allowable.
- Part IV—Summary of Credits From Separate Parts III.
You use this part on one Form 1116 (the one with the largest
amount entered on line 21) to summarize the foreign tax credits figured on
separate Forms 1116.
 | You should keep the following records in case you are later
asked to verify the taxes shown on your Form 1116, Form 1040, or Form 1040NR.
You do not have to attach these records to your Form 1040 or Form 1040NR.
- A receipt for each foreign tax payment.
- The foreign tax return if you claim a credit for taxes
accrued.
- Any payee statement (such as Form 1099-DIV or Form 1099-INT)
showing foreign taxes reported to you.
The receipt or return you keep as proof should be either
the original, a duplicate original, a duly certified or authenticated copy, or a
sworn copy. If the receipt or return is in a foreign language, you also should
have a certified translation of it. Revenue Ruling 67-308 in Cumulative Bulletin
1967-2 discusses in detail the requirements of the certified translation. Issues
of the Cumulative Bulletin are available in most IRS offices and you are welcome
to read them there.
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