This lesson covers assisting U.S. citizens and resident aliens who may be eligible for the Foreign Tax Credit (FTC). This credit applies to taxpayers who have paid (or accrued) foreign taxes to a foreign country on foreign-sourced income and are subject to U.S. tax on the same income. Although the foreign tax credit is not specifically listed on the intake and interview sheet, ask taxpayers if they paid any tax to a foreign country.
If the foreign tax paid is reported on Form 1099-INT or Form 1099-DIV, the taxpayer may be able to elect to report it on Form 1040 instead of using Form 1116. However, if the foreign tax paid is a result of living and working outside the U.S., determine which taxes and types of foreign income are eligible for the foreign tax credit and accurately compute the credit using Form 1116.
Form 1116 is part of the International certification. The first topic of this lesson, Election To Claim Foreign Tax Credit Without Filing Form 1116, is for all certification tracks. The rest of the lesson is for International certification volunteers only.
U.S. Armed Forces members who have paid foreign tax may need to provide additional documents to the military legal assistance officer or seek assistance from a professional tax preparer.
To identify qualifying foreign income and taxes, use the interview techniques and tools discussed in the Screening and Interviewing lesson. Use an intake and interview sheet to ask taxpayers questions related to credits that may be reportable.