# Requirement for Form 1116



## manny.j (Dec 4, 2011)

Hello All,

I am using the IRS recommended FFFF to submit our tax-return from abroad.

We used a tax-preparer in the past to submit our tax-return who, for some reason, in addition to Form 2555 also completed Form 1116. Our gross income is much less than then "Foreign Earned Income Exclusion" limit (currently at $102,100). In Line 21 (Other income) of 1040, we include the figure from Form 2555 with a minus sign in the front.

Anyway, just to ensure we stay consistent with what our tax-preparer did for us, we also completed Form 1116 this year. However, when we tried printing the tax-return...this online submission website did not include Form 1116 for us.

Therefore, could someone please help us-

1. What is the purpose of Form 1116 and who is required to fill it.
2. If we are required to fill it, which section of 1040 are we required to complete to enable inclusion of this form.

Thank you for any help or advice you can provide...


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## Bevdeforges (Nov 16, 2007)

I'm no expert on form 1116, but as far as I know you only "have" to fill it out if you are claiming a credit of income taxes paid to another country against income taxes payable in the US. There is also the need to split your income (and the respective 1116 form) between "earned income" (i.e. salary and similar) and "passive income" (bank interest and other investment-type income).

You're not the first person to report that a tax preparer will file both a 2555 and a 1116, even if they are not claiming the foreign tax credit. But it's not at all necessary. It may just be a way of the preparer covering their own posterior.

It's possible to file both forms - if your earned income exceeds the FEIE limit and/or if you have investment income and/or bank interest that exceeds your personal exemptions plus standard deduction. But I used the FFFF this year (for the first time) and found that anything that results in a 0 net benefit seems to get eliminated by the system.
Cheers,
Bev


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## Moulard (Feb 3, 2017)

Form 1116 is the form you use to get credit against your US taxes for the foreign taxes you have paid or accrued during the US tax year.

As Bev says, its one form, you need to split your income into general (typically all the earned income), passive (all the investment income), lump-sum payments, income re-sourced by treaty etc)

Form 2555 is technically also a foreign tax credit, (in that it reduces your AGI).

Reasons why you might want / need to file both are:

-- Your earned income is above the 2555 threshold 

-- You have paid foreign taxes on investment or other types of income.

The amount from your various 1116 forms gets added up and entered on line 48 of the 1040. 

One of the advantages of revoking the 2555 is that unused foreign tax credits carry-over for up to 10 years and can be used to offset future tax bills. (that is if you paid 10k in foreign taxes, but only owe 8k in US taxes, you can carry-over the remaining 2k) 

Its why some folks will say that using the 2555 may not result in optimum results.


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