# Help with f1116



## Transplant_DK

Due to the exchange rate, I have exceeded the FEIE and am struggling with f1116. So far, I'm super confused about how I'm too report taxes paid on only the portion of my income that wasn't excluded on the F2555 as I only have figures for how much taxes were paid on my total income. Do I try to do a calculation by taking the total income and total tax paid and then figure how much the tax would have been (approximately) for the difference (the amount over the exclusion)?

I'm sure I'll be back with more questions--the part about dividing one number by another and so on has my head spinning. Does anyone know of any good sources of info on filling this out? I've done a search here, but I think most have been lucky enough to avoid this form.


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## Bevdeforges

Yeah, that's the "joy" of exceeding the FEIE and having to go the 1116 route. 

Find a logical method that apportions what you paid to the Danish government over the income you've had to declare to the US IRS. It may not be perfect, but if you can justify it, it may well fly. (The IRS has bigger fish to fry as long as you're not obviously trying to "defraud" the US tax system.)
Cheers,
Bev


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## Transplant_DK

Thanks, I think I can just use the tax rate to figure out how much it would be on the small portion that exceeds the FEIE. 

Now to another question: I got tied up with the formula that's included for deductions--if I don't try to exclude housing costs, etc (and really there is no need given how much I pay in tax here), then I get a "zero" that is then supposed to be multiplied by a percentage. I'm sure that's wrong. 

When trying to figure it out, I saw that it is possible to avoid the f1116 by instead itemizing deductions, with the income tax being the deduction. I would assume I'd compute it in the same way--figure out how much taxes I paid on the income that exceeds the FEIE amount and then list that on Schedule A under income tax. I guess I'd have to include a statement that it is from foreign taxes paid. Has anyone done this? 

If not, does anyone know how to fill out section 3 of the f1116 if I don't want to make housing or other deductions directly or indirectly related to my income?


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## Bevdeforges

Where are you getting the formula for deductions? You don't have to take an exclusion for housing costs at all - which eliminates the problem. If you haven't taken any of the relevant deductions, then your result really is 0 which multiplied by a percentage is 0. But I don't see where this is on the 1116 form.

You could conceivably take your foreign income taxes as an itemized deduction - but if you're also taking the FEIE, you'll have to apportion your itemized deductions between the portion of your income you've excluded and what's left, so you don't get full benefit of the tax credits.
Cheers,
Bev


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## Transplant_DK

Bevdeforges said:


> Where are you getting the formula for deductions? You don't have to take an exclusion for housing costs at all - which eliminates the problem. If you haven't taken any of the relevant deductions, then your result really is 0 which multiplied by a percentage is 0. But I don't see where this is on the 1116 form.
> 
> You could conceivably take your foreign income taxes as an itemized deduction - but if you're also taking the FEIE, you'll have to apportion your itemized deductions between the portion of your income you've excluded and what's left, so you don't get full benefit of the tax credits.
> Cheers,
> Bev


The formula for deductions is in the instructions for f1116: 

1a Gross income from sources within country shown above and of the type checked above (see page 13 of the instructions) ....

Deductions and losses (Caution: See pages 13 and 14 of the instructions):

Expenses definitely related to the income on line 1a (attach statement) . . . . . . . . . 
Pro rata share of other deductions not definitely related:
Certain itemized deductions or standard deduction
(see instructions) . . . . . . .
Other deductions (attach statement) .
Add lines 3a and 3b . . . . . .
Gross foreign source income (see instructions) . 
Gross income from all sources (see instructions) . 
Divide line 3d by line 3e (see instructions) . . . 
Multiply line 3c by line 3f

So, from what I understand, I put my gross income in 1 a (this is the amount that is not excluded with the FEIE and only what is earned in the foreign country). Then, if I don't take any housing, etc deductions, the total of 3a and 3b would be zero. I then enter my gross foreign income (which is the foreign earned income including what was excluded) for line 3d, and then 3e is that amount plus other earnings that are not wages (e.g. dividends). I divide 3d by 3e and get a percentage which then needs to be multiplied by 3c, which would be zero if I don't have deductions. Does that sound correct?

I really, really appreciate your help, Bev. I'm not in a position right now to hire a CPA and am determined to get this monkey off my back once and for all. I'm actually one of those people who pays students loans, etc and I hate not being up to date with my taxes, but I just get so overwhelmed.


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## Bevdeforges

Ooh, made me look - both at the form and the instructions. (It has been years since I had to file a form 1116.)

I think you're right in how you're doing it. (The IRS loves these self-calculation lines where you multiply some percentage by 0 and your get 0.)

The name of the game is to get your taxes due down to 0, which means any penalty for late filing is a percentage times 0. (I told you the IRS loves this sort of thing.) With the tax rates in Denmark, I suspect you'll have no trouble with that task.
Cheers,
Bev


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## Transplant_DK

Thanks again. I sailed through 2009, but hit a snag with 2010 where I am still showing that I owe about $200. I need to start from the top again and see where my figures went wrong, considering how much I have paid in Danish tax. 

There seems to be lots of room for mistakes and interpretation when filling out the 1116. I'm making a detailed explanation of my calculations and hoping they will take pity on me when they find errors.


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## Bevdeforges

Frankly, there is no, one, "correct" way to fill out the forms. As long as you can support what you have filled out should they come back and ask about it, you should be ok. (And frankly, they aren't going to come back and ask unless it really doesn't make any sense at all or looks overtly suspicious.) Keep in mind, too, what information they do and don't have ready access to.
Cheers,
Bev


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