# Help with US Form 1116, called "complex" by IRS



## aeolion (May 6, 2014)

Someone at the IRS had a great time writing the official blurb for form 1116. It is a gem of understatement: 

"The foreign tax credit laws are complex."

I made $23k in bank interest in Korea for 2013, and they withheld at the source $3,314. Interest is taxed at the rate of 14.5% from the first penny. I was born before 1946. I get $7,200 a year social security. The US tax on all this (1040) is $1,470.

Silly me, I assumed the $3,314 I paid in Korean taxes would leave me owing nothing. However, enter the 1116. It seems to say I get $209 tax credit. Which means I owe some $1,200. Not pleasant, but no big deal.

However, I am streamlining, and this happening back into history with penalties is quite a sum.

I have been married for four years, and filing jointly, there would be no tax. However, I discovered getting her a tax number takes a couple of months, and then it only becomes usuable the following year.

Am I missing something about the tax credit that is hardly a credit? Any suggestions?

aeolion


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## BBCWatcher (Dec 28, 2012)

aeolion said:


> I made $23k in bank interest in Korea for 2013, and they withheld at the source $3,314. Interest is taxed at the rate of 14.5% from the first penny. I was born before 1946. I get $7,200 a year social security. The US tax on all this (1040) is $1,470.
> 
> Silly me, I assumed the $3,314 I paid in Korean taxes would leave me owing nothing. However, enter the 1116. It seems to say I get $209 tax credit. Which means I owe some $1,200. Not pleasant, but no big deal.


Best guess is that something is wrong with your calculation. You're only in the 15% U.S. tax bracket anyway even Married Filing Separately, and thus your effective U.S. tax rate would be lower than 15%. So something looks off. I'd double check that. Where are you seeing that $3314 knocked down all the way to $209 -- what's doing that in Form 1116?

As an unrelated matter, are you aware that your spouse may qualify for U.S. Social Security spousal benefits?


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## aeolion (May 6, 2014)

BBC, as usual, you were right on. Got it right now. Thanks.

aeolion

PS. As for my wife and social security, not for a few decades.


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