When May They Take the Credit?
Cash Basis vs. Accrual Basis Taxpayer
To determine when the taxpayer may take the foreign tax credit, you need to know whether the taxpayer is a cash basis or accrual basis taxpayer:
Most individual taxpayers are cash basis taxpayers. Taxpayers on a cash basis may choose to use the accrual method to determine the foreign tax credit. However, once this choice has been made, the taxpayer must use the accrual method for the foreign tax credit on all future tax returns.
Taxpayers on the accrual basis should be referred to a professional tax preparer or military legal assistance officer for assistance, unless the taxpayer is on cash basis and chooses the accrual method to determine the foreign tax credit.