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File An Amended Return Online

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File An Amended Return Online

File an amended return online Publication 514 - Main Content Table of Contents Choosing To Take Credit or DeductionChoice Applies to All Qualified Foreign Taxes Making or Changing Your Choice Why Choose the Credit?Credit for Taxes Paid or Accrued Foreign Currency and Exchange Rates Foreign Tax Redetermination Who Can Take the Credit?U. File an amended return online S. File an amended return online Citizens Resident Aliens Nonresident Aliens What Foreign Taxes Qualify for the Credit?Tax Must Be Imposed on You You Must Have Paid or Accrued the Tax Tax Must Be the Legal and Actual Foreign Tax Liability Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) Foreign Taxes for Which You Cannot Take a CreditTaxes on Excluded Income Taxes for Which You Can Only Take an Itemized Deduction Taxes on Foreign Mineral Income Taxes From International Boycott Operations Taxes on Combined Foreign Oil and Gas Income Taxes of U. File an amended return online S. File an amended return online Persons Controlling Foreign Corporations and Partnerships Taxes Related to a Foreign Tax Credit Splitting Event How To Figure the CreditLimit on the Credit Separate Limit Income Allocation of Foreign Taxes Foreign Taxes From a Partnership or an S Corporation Figuring the Limit Qualified Dividends Capital Gains and Losses Allocation of Foreign and U. File an amended return online S. File an amended return online Losses Tax Treaties Carryback and CarryoverTime Limit on Tax Assessment Claim for Refund Taxes All Credited or All Deducted Married Couples How To Claim the CreditForm 1116 Records To Keep Simple Example — Filled-In Form 1116Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Comprehensive Example — Filled-In Form 1116Foreign earned income. File an amended return online Employee business expenses. File an amended return online Forms 1116 Computation of Taxable Income Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Unused Foreign Taxes How To Get Tax HelpLow Income Taxpayer Clinics Choosing To Take Credit or Deduction You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. File an amended return online You can change your choice for each year's taxes. File an amended return online To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. File an amended return online S. File an amended return online tax return. File an amended return online However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. File an amended return online See How To Figure the Credit , later. File an amended return online To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. File an amended return online Figure your tax both ways—claiming the credit and claiming the deduction. File an amended return online Then fill out your return the way that benefits you more. File an amended return online See Why Choose the Credit, later. File an amended return online Choice Applies to All Qualified Foreign Taxes As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes. File an amended return online If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. File an amended return online You cannot deduct any of them. File an amended return online Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. File an amended return online You cannot take a credit for any of them. File an amended return online See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. File an amended return online There are exceptions to this general rule, which are described next. File an amended return online Exceptions for foreign taxes not allowed as a credit. File an amended return online   Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if: You paid the tax to a country for which a credit is not allowed because it provides support for acts of international terrorism, or because the United States does not have or does not conduct diplomatic relations with it or recognize its government and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act, You paid withholding tax on dividends from foreign corporations whose stock you did not hold for the required period of time, You paid withholding tax on income or gain (other than dividends) from property you did not hold for the required period of time, You paid withholding tax on income or gain to the extent you had to make related payments on positions in substantially similar or related property, You participated in or cooperated with an international boycott, You paid taxes in connection with the purchase or sale of oil or gas, or You paid or accrued taxes on income or gain in connection with a covered asset acquisition. File an amended return online Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. File an amended return online S. File an amended return online tax purposes. File an amended return online For more information, see Internal Revenue Code section 901(m). File an amended return online The IRS intends to issue guidance that will explain this provision in greater detail. File an amended return online   For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction , later, under Foreign Taxes for Which You Cannot Take a Credit. File an amended return online Foreign taxes that are not income taxes. File an amended return online   In most cases, only foreign income taxes qualify for the foreign tax credit. File an amended return online Other taxes, such as foreign real and personal property taxes, do not qualify. File an amended return online But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. File an amended return online   In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. File an amended return online However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). File an amended return online Carrybacks and carryovers. File an amended return online   There is a limit on the credit you can claim in a tax year. File an amended return online If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. File an amended return online If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. File an amended return online That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. File an amended return online   For more information on the limit, see How To Figure the Credit , later. File an amended return online For more information on carrybacks and carryovers, see Carryback and Carryover , later. File an amended return online Making or Changing Your Choice You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return (without regard to any extension of time to file) for the tax year in which the taxes were actually paid or accrued. File an amended return online You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. File an amended return online Example. File an amended return online You paid foreign taxes for the last 13 years and chose to deduct them on your U. File an amended return online S. File an amended return online income tax returns. File an amended return online You were timely in both filing your returns and paying your U. File an amended return online S. File an amended return online tax liability. File an amended return online In February 2013, you file an amended return for tax year 2002 choosing to take a credit for your 2002 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. File an amended return online Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). File an amended return online Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. File an amended return online Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. File an amended return online If you are unable to claim all of them in those 2 years, you carry them forward to the 10 years following the year in which they arose. File an amended return online Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 2000 and 2001 has passed, you cannot change your choice and carry the unused 2002 foreign taxes back to tax years 2000 and 2001. File an amended return online Because the 10-year periods for changing the choice have not passed for your 2003 through 2012 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 2002 foreign taxes. File an amended return online However, you must reduce the unused 2002 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax years 2000 and 2001. File an amended return online You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. File an amended return online See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. File an amended return online Why Choose the Credit? The foreign tax credit is intended to relieve you of a double tax burden when your foreign source income is taxed by both the United States and the foreign country. File an amended return online In most cases, if the foreign tax rate is higher than the U. File an amended return online S. File an amended return online rate, there will be no U. File an amended return online S. File an amended return online tax on the foreign income. File an amended return online If the foreign tax rate is lower than the U. File an amended return online S. File an amended return online rate, U. File an amended return online S. File an amended return online tax on the foreign income will be limited to the difference between the rates. File an amended return online The foreign tax credit can only reduce U. File an amended return online S. File an amended return online taxes on foreign source income; it cannot reduce U. File an amended return online S. File an amended return online taxes on U. File an amended return online S. File an amended return online source income. File an amended return online Although no one rule covers all situations, in most cases it is better to take a credit for qualified foreign taxes than to deduct them as an itemized deduction. File an amended return online This is because: A credit reduces your actual U. File an amended return online S. File an amended return online income tax on a dollar-for-dollar basis, while a deduction reduces only your income subject to tax, You can choose to take the foreign tax credit even if you do not itemize your deductions. File an amended return online You then are allowed the standard deduction in addition to the credit, and If you choose to take the foreign tax credit, and the taxes paid or accrued exceed the credit limit for the tax year, you may be able to carry over or carry back the excess to another tax year. File an amended return online (See Limit on credit under How To Figure the Credit, later. File an amended return online ) Example 1. File an amended return online For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. File an amended return online None of the dividends are qualified dividends. File an amended return online You file a joint return and can claim two $3,900 exemptions. File an amended return online You had to pay $2,000 in foreign income taxes on the dividend income. File an amended return online If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. File an amended return online Your taxable income then is $57,500 and your tax is $7,736. File an amended return online If you take the credit instead, your itemized deductions are only $13,000. File an amended return online Your taxable income then is $59,500 and your tax before the credit is $8,036. File an amended return online After the credit, however, your tax is only $6,036. File an amended return online Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. File an amended return online Example 2. File an amended return online In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. File an amended return online You report on your U. File an amended return online S. File an amended return online return this income as well as $56,000 of U. File an amended return online S. File an amended return online source wages and an allowable $49,000 partnership loss from a U. File an amended return online S. File an amended return online partnership. File an amended return online Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. File an amended return online You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. File an amended return online If you deduct the foreign tax on your U. File an amended return online S. File an amended return online return, your taxable income is a negative $250 ($5,000 + $56,000 − $49,000 − $1,500 − $6,850 − $3,900) and your tax is $0. File an amended return online If you take the credit instead, your taxable income is $1,250 ($5,000 + $56,000 − $49,000 − $3,900 − $6,850) and your tax before the credit is $126. File an amended return online You can take a credit of only $113 because of limits discussed later. File an amended return online Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. File an amended return online If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). File an amended return online When deciding whether to take the credit or the deduction this year, you will need to consider whether you can benefit from a carryback or carryover of that unused foreign tax. File an amended return online Credit for Taxes Paid or Accrued You can claim the credit for a qualified foreign tax in the tax year in which you pay it or accrue it, depending on your method of accounting. File an amended return online “Tax year” refers to the tax year for which your U. File an amended return online S. File an amended return online return is filed, not the tax year for which your foreign return is filed. File an amended return online Accrual method of accounting. File an amended return online   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. File an amended return online You are using an accrual method of accounting if you report income when you earn it, rather than when you receive it, and you deduct your expenses when you incur them, rather than when you pay them. File an amended return online   In most cases, foreign taxes accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. File an amended return online Generally, this occurs on the last day of the tax year for which your foreign return is filed. File an amended return online Contesting your foreign tax liability. File an amended return online   If you are contesting your foreign tax liability, you cannot accrue it and take a credit until the amount of foreign tax due is finally determined. File an amended return online However, if you choose to pay the tax liability you are contesting, you can take a credit for the amount you pay before a final determination of foreign tax liability is made. File an amended return online Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. File an amended return online If the amount of foreign taxes taken as a credit differs from the final foreign tax liability, you may have to adjust the credit, as discussed later under Foreign Tax Redetermination . File an amended return online You may have to post a bond. File an amended return online   If you claim a credit for taxes accrued but not paid, you may have to post an income tax bond to guarantee your payment of any tax due in the event the amount of foreign tax paid differs from the amount claimed. File an amended return online   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. File an amended return online Cash method of accounting. File an amended return online   If you use the cash method of accounting, you can choose to take the credit either in the year you pay the tax or in the year you accrue it. File an amended return online You are using the cash method of accounting if you report income in the year you actually or constructively receive it, and deduct expenses in the year you pay them. File an amended return online Choosing to take credit in the year taxes accrue. File an amended return online   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. File an amended return online You make the choice by checking the box in Part II of Form 1116. File an amended return online Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue. File an amended return online   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. File an amended return online You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. File an amended return online   If you make the choice to take the credit when foreign taxes accrue and pay them in a later year, you cannot claim a deduction for any part of the previously accrued taxes. File an amended return online Credit based on taxes paid in earlier year. File an amended return online   If, in earlier years, you took the credit based on taxes paid, and this year you choose to take the credit based on taxes accrued, you may be able to take the credit this year for taxes from more than one year. File an amended return online Example. File an amended return online Last year you took the credit based on taxes paid. File an amended return online This year you chose to take the credit based on taxes accrued. File an amended return online During the year you paid foreign income taxes owed for last year. File an amended return online You also accrued foreign income taxes for this year that you did not pay by the end of the year. File an amended return online You can base the credit on your return for this year on both last year's taxes that you paid and this year's taxes that you accrued. File an amended return online Foreign Currency and Exchange Rates U. File an amended return online S. File an amended return online income tax is imposed on income expressed in U. File an amended return online S. File an amended return online dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. File an amended return online Therefore, fluctuations in the value of the foreign currency relative to the U. File an amended return online S. File an amended return online dollar may affect the foreign tax credit. File an amended return online Translating foreign currency into U. File an amended return online S. File an amended return online dollars. File an amended return online   If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. File an amended return online S. File an amended return online dollars. File an amended return online How and when you do this depends on your functional currency. File an amended return online In most cases, your functional currency is the U. File an amended return online S. File an amended return online dollar unless you are required to use the currency of a foreign country. File an amended return online   You must make all federal income tax determinations in your functional currency. File an amended return online The U. File an amended return online S. File an amended return online dollar is the functional currency for all taxpayers except some qualified business units. File an amended return online A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. File an amended return online Unless you are self-employed, your functional currency is the U. File an amended return online S. File an amended return online dollar. File an amended return online   Even if you are self-employed and have a qualified business unit, your functional currency is the U. File an amended return online S. File an amended return online dollar if any of the following apply. File an amended return online You conduct the business primarily in dollars. File an amended return online The principal place of business is located in the United States. File an amended return online You choose to or are required to use the dollar as your functional currency. File an amended return online The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. File an amended return online   If your functional currency is the U. File an amended return online S. File an amended return online dollar, you must immediately translate into dollars all items of income, expense, etc. File an amended return online , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. File an amended return online If there is more than one exchange rate, use the one that most properly reflects your income. File an amended return online In most cases, you can get exchange rates from banks and U. File an amended return online S. File an amended return online Embassies. File an amended return online   If your functional currency is not the U. File an amended return online S. File an amended return online dollar, make all income tax determinations in your functional currency. File an amended return online At the end of the year, translate the results, such as income or loss, into U. File an amended return online S. File an amended return online dollars to report on your income tax return. File an amended return online    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. File an amended return online   Use the rate of exchange in effect on the date you paid the foreign taxes to the foreign country unless you meet the exception discussed next. File an amended return online If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. File an amended return online If you make foreign estimated tax payments, you use the rate of exchange in effect for the date on which you made the estimated tax payment. File an amended return online   The exchange rate rules discussed here apply even if the foreign taxes are paid or accrued with respect to a foreign tax credit splitting event (discussed later). File an amended return online Exception. File an amended return online   If you claim the credit for foreign taxes on an accrual basis, in most cases you must use the average exchange rate for the tax year to which the taxes relate. File an amended return online This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. File an amended return online The foreign taxes are paid on or after the first day of the tax year to which they relate. File an amended return online The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. File an amended return online The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). File an amended return online (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. File an amended return online )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. File an amended return online Election to use exchange rate on date paid. File an amended return online   If you have accrued foreign taxes that you are otherwise required to convert using the average exchange rate, you may elect to use the exchange rate in effect on the date the foreign taxes are paid if the taxes are denominated in a nonfunctional foreign currency. File an amended return online If any of the accrued taxes are unpaid, you must translate them into U. File an amended return online S. File an amended return online dollars using the exchange rate on the last day of the U. File an amended return online S. File an amended return online tax year to which those taxes relate. File an amended return online You may make the election for all nonfunctional currency foreign income taxes or only those nonfunctional currency foreign income taxes that are attributable to qualified business units with a U. File an amended return online S. File an amended return online dollar functional currency. File an amended return online Once made, the election applies to the tax year for which made and all subsequent tax years unless revoked with the consent of the IRS. File an amended return online The election is available for tax years beginning after 2004. File an amended return online It must be made by the due date (including extensions) for filing the tax return for the first tax year to which the election applies. File an amended return online Make the election by attaching a statement to the applicable tax return. File an amended return online The statement must identify whether the election is made for all foreign taxes or only for foreign taxes attributable to qualified business units with a U. File an amended return online S. File an amended return online dollar functional currency. File an amended return online Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. File an amended return online S. File an amended return online foreign tax credit claimed. File an amended return online The year in which to claim the credit remains the year to which the foreign taxes paid or accrued relate, even if the change in foreign tax liability occurs in a later year. File an amended return online If a foreign tax redetermination occurs, a redetermination of your U. File an amended return online S. File an amended return online tax liability is required if any of the following conditions apply. File an amended return online The accrued taxes when paid differ from the amounts claimed as a credit. File an amended return online The accrued taxes you claimed as a credit in one tax year are not paid within 2 years after the end of that tax year. File an amended return online If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. File an amended return online You will not be allowed a credit for the unpaid taxes until you pay them. File an amended return online When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. File an amended return online S. File an amended return online dollars using the exchange rate as of the date they were paid. File an amended return online The foreign tax credit is allowed for the year to which the foreign tax relates. File an amended return online See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. File an amended return online The foreign taxes you paid are refunded in whole or in part. File an amended return online For taxes taken into account when accrued but translated into dollars on the date of payment, the dollar value of the accrued tax differs from the dollar value of the tax paid because of fluctuations in the exchange rate between the date of accrual and the date of payment. File an amended return online However, no redetermination is required if the change in foreign tax liability for each foreign country is solely attributable to exchange rate fluctuations and is less than the smaller of: $10,000, or 2% of the total dollar amount of the foreign tax initially accrued for that foreign country for the U. File an amended return online S. File an amended return online tax year. File an amended return online In this case, you must adjust your U. File an amended return online S. File an amended return online tax in the tax year in which the accrued foreign taxes are paid. File an amended return online Notice to the Internal Revenue Service (IRS) of Redetermination You are required to notify the IRS about a foreign tax credit redetermination that affects your U. File an amended return online S. File an amended return online tax liability for each tax year affected by the redetermination. File an amended return online In most cases, you must file Form 1040X, Amended U. File an amended return online S. File an amended return online Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. File an amended return online S. File an amended return online tax liability for the year or years affected. File an amended return online See Contents of statement , later. File an amended return online You are not required to attach Form 1116 for a tax year affected by a redetermination if: The amount of your creditable taxes paid or accrued during the tax year is not more than $300 ($600 if married filing a joint return) as a result of the foreign tax redetermination, and You meet the requirements listed under Exemption from foreign tax credit limit under How To Figure the Credit, later. File an amended return online There are other exceptions to this requirement. File an amended return online They are discussed later under Due date of notification to IRS . File an amended return online Contents of statement. File an amended return online   The statement must include all of the following. File an amended return online Your name, address, and taxpayer identification number. File an amended return online The tax year or years that are affected by the foreign tax redetermination. File an amended return online The date or dates the foreign taxes were accrued, if applicable. File an amended return online The date or dates the foreign taxes were paid. File an amended return online The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. File an amended return online Information sufficient to determine any interest due from or owing to you, including the amount of any interest paid to you by the foreign government and the dates received. File an amended return online   In the case of any foreign taxes that were not paid before the date two years after the close of the tax year to which those taxes relate, you must provide the amount of those taxes in foreign currency and the exchange rate that was used to translate that amount when originally claimed as a credit. File an amended return online   If any foreign tax was refunded in whole or in part, you must provide the date and amount (in foreign currency) of each refund, the exchange rate that was used to translate each amount when originally claimed as a credit, and the exchange rate for the date the refund was received (for purposes of computing foreign currency gain or loss under Internal Revenue Code section 988). File an amended return online Due date of notification to IRS. File an amended return online   If you pay less foreign tax than you originally claimed a credit for, in most cases you must file a notification by the due date (with extensions) of your original return for your tax year in which the foreign tax redetermination occurred. File an amended return online There is no limit on the time the IRS has to redetermine and assess the correct U. File an amended return online S. File an amended return online tax due. File an amended return online If you pay more foreign tax than you originally claimed a credit for, you have 10 years to file a claim for refund of U. File an amended return online S. File an amended return online taxes. File an amended return online See Time Limit on Refund Claims , later. File an amended return online   Exceptions to this due date are explained in the next two paragraphs. File an amended return online Multiple redeterminations of U. File an amended return online S. File an amended return online tax liability for same tax year. File an amended return online   Where more than one foreign tax redetermination requires a redetermination of U. File an amended return online S. File an amended return online tax liability for the same tax year and those redeterminations occur in the same tax year or within two consecutive tax years, you can file for that tax year one notification (Form 1040X with a Form 1116 and the required statement) that reflects all those tax redeterminations. File an amended return online If you choose to file one notification, the due date for that notification is the due date of the original return (with extensions) for the year in which the first foreign tax redetermination that reduced your foreign tax liability occurred. File an amended return online However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. File an amended return online S. File an amended return online tax liability is required may occur after the due date for providing that notification. File an amended return online In this situation, you may have to file more than one Form 1040X for that tax year. File an amended return online Additional U. File an amended return online S. File an amended return online tax due eliminated by foreign tax credit carryback or carryover. File an amended return online   If a foreign tax redetermination requires a redetermination of U. File an amended return online S. File an amended return online tax liability that would otherwise result in an additional amount of U. File an amended return online S. File an amended return online tax due, but the additional tax is eliminated by a carryback or carryover of an unused foreign tax, you do not have to amend your tax return for the year affected by the redetermination. File an amended return online Instead, you can notify the IRS by attaching a statement to the original return for the tax year in which the foreign tax redetermination occurred. File an amended return online You must file the statement by the due date (with extensions) of that return. File an amended return online The statement must show the amount of the unused foreign taxes paid or accrued and a detailed schedule showing the computation of the carryback or carryover (including the amounts carried back or over to the year for which a redetermination on U. File an amended return online S. File an amended return online tax liability is required). File an amended return online Failure-to-notify penalty. File an amended return online   If you fail to notify the IRS of a foreign tax redetermination and cannot show reasonable cause for the failure, you may have to pay a penalty. File an amended return online   For each month, or part of a month, that the failure continues, you pay a penalty of 5% of the tax due resulting from a redetermination of your U. File an amended return online S. File an amended return online tax. File an amended return online This penalty cannot be more than 25% of the tax due. File an amended return online Foreign tax refund. File an amended return online   If you receive a foreign tax refund without interest from the foreign government, you will not have to pay interest on the amount of tax due resulting from the adjustment to your U. File an amended return online S. File an amended return online tax for the time before the date of the refund. File an amended return online   However, if you receive a foreign tax refund with interest, you must pay interest to the IRS up to the amount of the interest paid to you by the foreign government. File an amended return online The interest you must pay cannot be more than the interest you would have had to pay on taxes that were unpaid for any other reason for the same period. File an amended return online Interest also is owed from the time you receive a refund until you pay the additional tax due. File an amended return online Foreign tax imposed on foreign refund. File an amended return online   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. File an amended return online However, when you refigure the foreign tax credit taken for the original foreign tax, reduce the amount of the refund by the foreign tax paid on the refund. File an amended return online Example. File an amended return online You paid a foreign income tax of $3,000 in 2011, and received a foreign tax refund of $500 in 2013 on which a foreign tax of $100 was imposed. File an amended return online When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. File an amended return online Time Limit on Refund Claims You have 10 years to file a claim for refund of U. File an amended return online S. File an amended return online tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. File an amended return online The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year in which the taxes were actually paid or accrued. File an amended return online You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. File an amended return online The 10-year period applies to claims for refund or credit based on: Fixing math errors in figuring qualified foreign taxes, Reporting qualified foreign taxes not originally reported on the return, or Any other change in the size of the credit (including one caused by correcting the foreign tax credit limit). File an amended return online The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. File an amended return online See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. File an amended return online Who Can Take the Credit? U. File an amended return online S. File an amended return online citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. File an amended return online S. File an amended return online tax on foreign source income may be able to take a foreign tax credit. File an amended return online U. File an amended return online S. File an amended return online Citizens If you are a U. File an amended return online S. File an amended return online citizen, you are taxed by the United States on your worldwide income wherever you live. File an amended return online You are normally entitled to take a credit for foreign taxes you pay or accrue. File an amended return online Resident Aliens If you are a resident alien of the United States, you can take a credit for foreign taxes subject to the same general rules as U. File an amended return online S. File an amended return online citizens. File an amended return online If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. File an amended return online Usually, you can take a credit only for those foreign taxes imposed on income you actually or constructively received while you had resident alien status. File an amended return online For information on alien status, see Publication 519. File an amended return online Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. File an amended return online However, you may be able to take the credit if: You were a bona fide resident of Puerto Rico during your entire tax year, or You pay or accrue tax to a foreign country or U. File an amended return online S. File an amended return online possession on income from foreign sources that is effectively connected with a trade or business in the United States. File an amended return online But if you must pay tax to a foreign country or U. File an amended return online S. File an amended return online possession on income from U. File an amended return online S. File an amended return online sources only because you are a citizen or a resident of that country or U. File an amended return online S. File an amended return online possession, do not use that tax in figuring the amount of your credit. File an amended return online For information on alien status and effectively connected income, see Publication 519. File an amended return online What Foreign Taxes Qualify for the Credit? In most cases, the following four tests must be met for any foreign tax to qualify for the credit. File an amended return online The tax must be imposed on you. File an amended return online You must have paid or accrued the tax. File an amended return online The tax must be the legal and actual foreign tax liability. File an amended return online The tax must be an income tax (or a tax in lieu of an income tax). File an amended return online Certain foreign taxes do not qualify for the credit even if the four tests are met. File an amended return online See Foreign Taxes for Which You Cannot Take a Credit, later. File an amended return online Tax Must Be Imposed on You You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U. File an amended return online S. File an amended return online possession. File an amended return online For example, a tax that is deducted from your wages is considered to be imposed on you. File an amended return online You cannot shift the right to claim the credit by contract or other means. File an amended return online Foreign country. File an amended return online   A foreign country includes any foreign state and its political subdivisions. File an amended return online Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. File an amended return online U. File an amended return online S. File an amended return online possessions. File an amended return online   For foreign tax credit purposes, all qualified taxes paid to U. File an amended return online S. File an amended return online possessions are considered foreign taxes. File an amended return online For this purpose, U. File an amended return online S. File an amended return online possessions include Puerto Rico and American Samoa. File an amended return online   When the term “foreign country” is used in this publication, it includes U. File an amended return online S. File an amended return online possessions unless otherwise stated. File an amended return online You Must Have Paid or Accrued the Tax In most cases, you can claim the credit only if you paid or accrued the foreign tax to a foreign country or U. File an amended return online S. File an amended return online possession. File an amended return online However, the paragraphs that follow describe some instances in which you can claim the credit even if you did not directly pay or accrue the tax yourself. File an amended return online Joint return. File an amended return online   If you file a joint return, you can claim the credit based on the total foreign income taxes paid or accrued by you and your spouse. File an amended return online Combined income. File an amended return online   If foreign tax is imposed on the combined income of two or more persons (for example, spouses), the tax is allocated among, and considered paid by, these persons on a pro rata basis in proportion to each person's portion of the combined income, as determined under foreign law and Regulations section 1. File an amended return online 901-2(f)(3)(iii). File an amended return online Combined income with respect to each foreign tax that is imposed on a combined basis (and combined income subject to tax exemption or preferential tax rates) is computed separately, and the tax on that combined income is allocated separately. File an amended return online   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. File an amended return online However, you can choose to apply the new rules to foreign taxes paid or accrued in tax years beginning after December 31, 2010, and before February 15, 2012. File an amended return online For more details, see paragraphs (f) and (h) of Regulations section 1. File an amended return online 901-2. File an amended return online For similar rules applicable to prior tax years, see Regulations section 1. File an amended return online 901-2 (revised as of April 1, 2011). File an amended return online Example. File an amended return online You and your spouse reside in Country X, which imposes income tax on your combined incomes. File an amended return online Both of you use the “u” as your functional currency. File an amended return online Country X apportions tax based on income. File an amended return online You had income of 30,000u and your spouse had income of 20,000u. File an amended return online Your filing status on your U. File an amended return online S. File an amended return online income tax return is married filing separately. File an amended return online You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. File an amended return online S income tax return. File an amended return online Your spouse can claim only 40% (20,000u/50,000u). File an amended return online Partner or S corporation shareholder. File an amended return online   If you are a member of a partnership, or a shareholder in an S corporation, you can claim the credit based on your proportionate share of the foreign income taxes paid or accrued by the partnership or the S corporation. File an amended return online These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. File an amended return online However, if you are a shareholder in an S corporation that in turn owns stock in a foreign corporation, you cannot claim a credit for your share of foreign taxes paid by the foreign corporation. File an amended return online Beneficiary. File an amended return online   If you are a beneficiary of an estate or trust, you may be able to claim the credit based on your proportionate share of foreign income taxes paid or accrued by the estate or trust. File an amended return online This amount will be shown on the Schedule K-1 you receive from the estate or trust. File an amended return online However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. File an amended return online Mutual fund shareholder. File an amended return online   If you are a shareholder of a mutual fund or other regulated investment company (RIC), you may be able to claim the credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. File an amended return online You should receive from the mutual fund or other RIC a Form 1099-DIV, or similar statement, showing your share of the foreign income, and your share of the foreign taxes paid. File an amended return online If you do not receive this information, you will need to contact the fund. File an amended return online Controlled foreign corporation shareholder. File an amended return online   If you are a shareholder of a controlled foreign corporation and choose to be taxed at corporate rates on the amount you must include in gross income from that corporation, you can claim the credit based on your share of foreign taxes paid or accrued by the controlled foreign corporation. File an amended return online If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. File an amended return online Controlled foreign corporation. File an amended return online   A controlled foreign corporation is a foreign corporation in which U. File an amended return online S. File an amended return online shareholders own more than 50% of the voting power or value of the stock. File an amended return online You are considered a U. File an amended return online S. File an amended return online shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. File an amended return online See Internal Revenue Code sections 951(b) and 958(b) for more information. File an amended return online Tax Must Be the Legal and Actual Foreign Tax Liability The amount of foreign tax that qualifies is not necessarily the amount of tax withheld by the foreign country. File an amended return online Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. File an amended return online Foreign tax refund. File an amended return online   You cannot take a foreign tax credit for income taxes paid to a foreign country if it is reasonably certain the amount would be refunded, credited, rebated, abated, or forgiven if you made a claim. File an amended return online   For example, the United States has tax treaties with many countries allowing U. File an amended return online S. File an amended return online citizens and residents reductions in the rates of tax of those foreign countries. File an amended return online However, some treaty countries require U. File an amended return online S. File an amended return online citizens and residents to pay the tax figured without regard to the lower treaty rates and then claim a refund for the amount by which the tax actually paid is more than the amount of tax figured using the lower treaty rate. File an amended return online The qualified foreign tax is the amount figured using the lower treaty rate and not the amount actually paid, because the excess tax is refundable. File an amended return online Subsidy received. File an amended return online   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. File an amended return online This rule applies even if the subsidy is given to a person related to you, or persons who participated with you in a transaction or a related transaction. File an amended return online A subsidy can be provided by any means but must be determined, directly or indirectly, in relation to the amount of tax, or to the base used to figure the tax. File an amended return online   The term “subsidy” includes any type of benefit. File an amended return online Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. File an amended return online Shareholder receiving refund for corporate tax in integrated system. File an amended return online   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. File an amended return online You may be able to claim a refund of these taxes from the foreign government. File an amended return online You must include the refund (including any amount withheld) in your income in the year received. File an amended return online Any tax withheld from the refund is a qualified foreign tax. File an amended return online Example. File an amended return online You are a shareholder of a French corporation. File an amended return online You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. File an amended return online The French government imposes a 15% withholding tax ($15) on the refund you received. File an amended return online You receive a check for $85. File an amended return online You include $100 in your income. File an amended return online The $15 of tax withheld is a qualified foreign tax. File an amended return online Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) In most cases, only income, war profits, and excess profits taxes (income taxes) qualify for the foreign tax credit. File an amended return online Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. File an amended return online Furthermore, foreign taxes on income can qualify even though they are not imposed under an income tax law if the tax is in lieu of an income, war profits, or excess profits tax. File an amended return online See Taxes in Lieu of Income Taxes , later. File an amended return online Income Tax Simply because the levy is called an income tax by the foreign taxing authority does not make it an income tax for this purpose. File an amended return online A foreign levy is an income tax only if it meets both of the following requirements. File an amended return online It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. File an amended return online The predominant character of the tax is that of an income tax in the U. File an amended return online S. File an amended return online sense. File an amended return online A foreign levy may meet these requirements even if the foreign tax law differs from U. File an amended return online S. File an amended return online tax law. File an amended return online The foreign law may include in income items that U. File an amended return online S. File an amended return online law does not include, or it may allow certain exclusions or deductions that U. File an amended return online S. File an amended return online law does not allow. File an amended return online Specific economic benefit. File an amended return online   In most cases, you get a specific economic benefit if you receive, or are considered to receive, an economic benefit from the foreign country imposing the levy, and: If there is a generally imposed income tax, the economic benefit is not available on substantially the same terms to all persons subject to the income tax, or If there is no generally imposed income tax, the economic benefit is not available on substantially the same terms to the population of the foreign country in general. File an amended return online   You are considered to receive a specific economic benefit if you have a business transaction with a person who receives a specific economic benefit from the foreign country and, under the terms and conditions of the transaction, you receive directly or indirectly all or part of the benefit. File an amended return online   However, see the exception discussed later under Pension, unemployment, and disability fund payments . File an amended return online Economic benefits. File an amended return online   Economic benefits include the following. File an amended return online Goods. File an amended return online Services. File an amended return online Fees or other payments. File an amended return online Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. File an amended return online Discharges of contractual obligations. File an amended return online   In most cases, the right or privilege merely to engage in business is not an economic benefit. File an amended return online Dual-capacity taxpayers. File an amended return online   If you are subject to a foreign country's levy and you also receive a specific economic benefit from that foreign country, you are a “dual-capacity taxpayer. File an amended return online ” As a dual-capacity taxpayer, you cannot claim a credit for any part of the foreign levy, unless you establish that the amount paid under a distinct element of the foreign levy is a tax, rather than a compulsory payment for a direct or indirect specific economic benefit. File an amended return online    For more information on how to establish amounts paid under separate elements of a levy, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Pension, unemployment, and disability fund payments. File an amended return online   A foreign tax imposed on an individual to pay for retirement, old-age, death, survivor, unemployment, illness, or disability benefits, or for substantially similar purposes, is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual. File an amended return online    No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement. File an amended return online For more information about these agreements, see Publication 54. File an amended return online Soak-up taxes. File an amended return online   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. File an amended return online A tax is a soak-up tax to the extent that liability for it depends on the availability of a credit for it against income tax imposed by another country. File an amended return online This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. File an amended return online Penalties and interest. File an amended return online   Amounts paid to a foreign government to satisfy a liability for interest, fines, penalties, or any similar obligation are not taxes and do not qualify for the credit. File an amended return online Taxes not based on income. File an amended return online   Foreign taxes based on gross receipts or the number of units produced, rather than on realized net income, do not qualify unless they are imposed in lieu of an income tax, as discussed next. File an amended return online Taxes based on assets, such as property taxes, do not qualify for the credit. File an amended return online Taxes in Lieu of Income Taxes A tax paid or accrued to a foreign country qualifies for the credit if it is imposed in lieu of an income tax otherwise generally imposed. File an amended return online A foreign levy is a tax in lieu of an income tax only if: It is not payment for a specific economic benefit as discussed earlier, and The tax is imposed in place of, and not in addition to, an income tax otherwise generally imposed. File an amended return online A tax in lieu of an income tax does not have to be based on realized net income. File an amended return online A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. File an amended return online In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. File an amended return online However, if the foreign country imposes a soak-up tax in lieu of an income tax, the amount that does not qualify for foreign tax credit is the lesser of the following amounts. File an amended return online The soak-up tax. File an amended return online The foreign tax you paid that is more than the amount you would have paid if you had been subject to the generally imposed income tax. File an amended return online Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. File an amended return online These are: Taxes on excluded income, Taxes for which you can only take an itemized deduction, Taxes on foreign mineral income, Taxes from international boycott operations, A portion of taxes on combined foreign oil and gas income, Taxes of U. File an amended return online S. File an amended return online persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. File an amended return online Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. File an amended return online S. File an amended return online gross income. File an amended return online Foreign Earned Income and Housing Exclusions You must reduce your foreign taxes available for the credit by the amount of those taxes paid or accrued on income that is excluded from U. File an amended return online S. File an amended return online income under the foreign earned income exclusion or the foreign housing exclusion. File an amended return online See Publication 54 for more information on the foreign earned income and housing exclusions. File an amended return online Wages completely excluded. File an amended return online   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. File an amended return online Wages partly excluded. File an amended return online   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. File an amended return online You find the amount allocable to your excluded wages by multiplying the foreign tax paid or accrued on foreign earned income received or accrued during the tax year by a fraction. File an amended return online   The numerator of the fraction is your foreign earned income and housing amounts excluded under the foreign earned income and housing exclusions for the tax year minus otherwise deductible expenses definitely related and properly apportioned to that income. File an amended return online Deductible expenses do not include the foreign housing deduction. File an amended return online   The denominator is your total foreign earned income received or accrued during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). File an amended return online If the foreign law taxes foreign earned income and some other income (for example, earned income from U. File an amended return online S. File an amended return online sources or a type of income not subject to U. File an amended return online S. File an amended return online tax), and the taxes on the other income cannot be segregated, the denominator of the fraction is the total amount of income subject to the foreign tax minus deductible expenses allocable to that income. File an amended return online Example. File an amended return online You are a U. File an amended return online S. File an amended return online citizen and a cash basis taxpayer, employed by Company X and living in Country A. File an amended return online Your records show the following: Foreign earned income received $125,000 Unreimbursed business travel expenses 20,000 Income tax paid to Country A 30,000 Exclusion of foreign earned  income and housing allowance 97,600     Because you can exclude part of your wages, you cannot claim a credit for part of the foreign taxes. File an amended return online To find that part, do the following. File an amended return online First, find the amount of business expenses allocable to excluded wages and therefore not deductible. File an amended return online To do this, multiply the otherwise deductible expenses by a fraction. File an amended return online That fraction is the excluded wages over your foreign earned income. File an amended return online   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. File an amended return online To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). File an amended return online The result is $81,984. File an amended return online Then, find the denominator of the fraction by subtracting all your deductible expenses from all your foreign earned income ($125,000 − $20,000 = $105,000). File an amended return online Finally, multiply the foreign tax you paid by the resulting fraction. File an amended return online   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. File an amended return online Taxes on Income From Puerto Rico Exempt From U. File an amended return online S. File an amended return online Tax If you have income from Puerto Rican sources that is not taxable, you must reduce your foreign taxes paid or accrued by the taxes allocable to the exempt income. File an amended return online For information on figuring the reduction, see Publication 570. File an amended return online Possession Exclusion If you are a bona fide resident of American Samoa and exclude income from sources in American Samoa, you cannot take a credit for the taxes you pay or accrue on the excluded income. File an amended return online For more information on this exclusion, see Publication 570. File an amended return online Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. File an amended return online However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. File an amended return online Taxes for Which You Can Only Take an Itemized Deduction You cannot claim a foreign tax credit for foreign income taxes paid or accrued under the following circumstances. File an amended return online However, you can claim an itemized deduction for these taxes. File an amended return online See Choosing To Take Credit or Deduction , earlier. File an amended return online Taxes Imposed By Sanctioned Countries (Section 901(j) Income) You cannot claim a foreign tax credit for income taxes paid or accrued to any country if the income giving rise to the tax is for a period (the sanction period) during which: The Secretary of State has designated the country as one that repeatedly provides support for acts of international terrorism, The United States has severed or does not conduct diplomatic relations with the country, or The United States does not recognize the country's government, and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act. File an amended return online The following countries meet this description for 2013. File an amended return online Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. File an amended return online Cuba. File an amended return online Iran. File an amended return online Libya (but see Note later). File an amended return online North Korea. File an amended return online Sudan. File an amended return online Syria. File an amended return online Waiver of denial of the credit. File an amended return online   A waiver can be granted to a sanctioned country if the President of the United States determines that granting the waiver is in the national interest of the United States and will expand trade and investment opportunities for U. File an amended return online S. File an amended return online companies in the sanctioned country. File an amended return online The President must report to Congress his intentions to grant the waiver and his reasons for granting the waiver not less than 30 days before the date on which the waiver is granted. File an amended return online Note. File an amended return online Effective December 10, 2004, the President granted a waiver to Libya. File an amended return online Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. File an amended return online Limit on credit. File an amended return online   In figuring the foreign tax credit limit, discussed later, income from a sanctioned country is a separate category of foreign income unless a Presidential waiver is granted. File an amended return online You must fill out a separate Form 1116 for this income. File an amended return online This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. File an amended return online Example. File an amended return online You lived and worked in Iran until August, when you were transferred to Italy. File an amended return online You paid taxes to each country on the income earned in that country. File an amended return online You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. File an amended return online Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. File an amended return online You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. File an amended return online Figuring the credit when a sanction ends. File an amended return online    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. File an amended return online For any of these countries, you can claim a foreign tax credit for the taxes paid or accrued to that country on the income for the period that begins after the end of the sanction period or the date the Presidential waiver was granted. File an amended return online Example. File an amended return online The sanctions against Country X ended on July 31. File an amended return online On August 19, you receive a distribution from a mutual fund of Country X income. File an amended return online The fund paid Country X income tax for you on the distribution. File an amended return online Because the distribution was made after the sanction ended, you may include the foreign tax paid on the distribution to compute your foreign tax credit. File an amended return online Amounts for the nonsanctioned period. File an amended return online   If a sanction period ends (or a Presidential waiver is granted) during your tax year and you are not able to determine the actual income and taxes for that period, you can allocate amounts to that period based on the number of days in the period that fall in your tax year. File an amended return online Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. File an amended return online   Number of nonsanctioned days in year  Number of days in year Example. File an amended return online You are a calendar year filer and received $20,000 of income from Country X in 2013 on which you paid tax of $4,500. File an amended return online Sanctions against Country X ended on July 11, 2013. File an amended return online You are unable to determine how much of the income or tax is for the nonsanctioned period. File an amended return online Because your tax year starts on January 1, and the Country X sanction ended on July 11, 2013, 173 days of your tax year are in the nonsanctioned period. File an amended return online You would compute the income for the nonsanctioned period as follows. File an amended return online 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. File an amended return online 173 365 × $4,500 = $2,133 To figure your foreign tax credit, you would use $9,479 as the income from Country X and $2,133 as the tax. File an amended return online Further information. File an amended return online   The rules for figuring the foreign tax credit after a country's sanction period ends are more fully explained in Revenue Ruling 92-62, Cumulative Bulletin 1992-2, page 193. File an amended return online This Cumulative Bulletin can be found in many libraries and IRS offices. File an amended return online Table 1. File an amended return online Countries Removed From the Sanction List or Granted Presidential Waiver   Sanction Period Country Starting Date Ending Date Iraq February 1, 1991 June 27, 2004 Libya January 1, 1987 December 9, 2004* *Presidential waiver granted for qualified income taxes arising after December 9, 2004. File an amended return online Taxes Imposed on Certain Dividends You cannot claim a foreign tax credit for withholding tax (defined later ) on dividends paid or accrued if either of the following applies to the dividends. File an amended return online The dividends are on stock you held for less than 16 days during the 31-day period that begins 15 days before the ex-dividend date (defined later). File an amended return online The dividends are for a period or periods totaling more than 366 days on preferred stock you held for less than 46 days during the 91-day period that begins 45 days before the ex-dividend date. File an amended return online If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. File an amended return online When figuring how long you held the stock, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. File an amended return online Regardless of how long you held the stock, you cannot claim the credit to the extent you have an obligation under a short sale or otherwise to make payments related to the dividend for positions in substantially similar or related property. File an amended return online Withholding tax. File an amended return online   For this purpose, withholding tax includes any tax determined on a gross basis. File an amended return online It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. File an amended return online Ex-dividend date. File an amended return online   The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. File an amended return online Example 1. File an amended return online You bought common stock from a foreign corporation on November 3. File an amended return online You sold the stock on November 19. File an amended return online You received a dividend on this stock because you owned it on the ex-dividend date of November 5. File an amended return online To claim the credit, you must have held the stock for at least 16 days within the 31-day period that began on October 21 (15 days before the ex-dividend date). File an amended return online Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. File an amended return online Example 2. File an amended return online The facts are the same as in Example 1 except that you sold the stock on November 14. File an amended return online You held the stock for only 11 days. File an amended return online You are not entitled to the credit. File an amended return online Exception. File an amended return online   If you are a securities dealer who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes paid on dividends regardless of how long you held the stock or whether you were obligated to make payments for positions in substantially similar or related property. File an amended return online See section 901(k)(4) of the Internal Revenue Code for more information. File an amended return online Taxes Withheld on Income or Gain (Other Than Dividends) For income or gain (other than dividends) paid or accrued on property, you cannot claim a foreign tax credit for withholding tax (defined later): If you have not held the property for at least 16 days during the 31-day period that begins 15 days before the date on which the right to receive the payment arises, or To the extent you have to make related payments on positions in substantially similar or related property. File an amended return online When figuring how long you held the property, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. File an amended return online Withholding tax. File an amended return online   For this purpose, withholding tax includes any tax determined on a gross basis. File an amended return online It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. File an amended return online Exception for dealers. File an amended return online   If you are a dealer in property who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes withheld on income or gain from that property regardless of how long you held it or whether you have to make related payments on positions in substantially similar or related property. File an amended return online See section 901(I)(2) of the Internal Revenue Code for more information. File an amended return online Covered Asset Acquisition ???You cannot take a credit for the disqualified portion of any foreign tax paid or accrued in connection with a covered asset acquisition. File an amended return online A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. File an amended return online S. File an amended return online tax purposes but not for foreign tax purposes. File an amended return online For more information, see Internal Revenue Code section 901(m). File an amended return online The IRS intends to issue guidance that will explain this provision in greater detail. File an amended return online Taxes in Connection With the Purchase or Sale of Oil or Gas You cannot claim a foreign tax credit for taxes paid or accrued to a foreign country in connection with the purchase or sale of oil or gas extracted in that country if you do not have an economic interest in the oil or gas, and the purchase price or sales price is different from the fair market value of the oil or gas at the time of purchase or sale. File an amended return online Taxes on Foreign Mineral Income You must reduce any taxes paid or accrued to a foreign country or possession on mineral income from that country or possession if you were allowed a deduction for percentage depletion for any part of the mineral income. File an amended return online For details, see Regulations section 1. File an amended return online 901-3. File an amended return online Taxes From International Boycott Operations If you participate in or cooperate with an international boycott during the tax year, your foreign taxes resulting from boycott activities will reduce the total taxes available for credit. File an amended return online See the instructions for line 12 in the Form 1116 instructions to figure this reduction. File an amended return online In most cases, this rule does not apply to employees with wages who are working and living in boycotting countries, or to retirees with pensions who are living in these countries. File an amended return online List of boycotting countries. File an amended return online   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. File an amended return online As of November 2013, the following countries are listed. File an amended return online Iraq. File an amended return online Kuwait. File an amended return online Lebanon. File an amended return online Libya. File an amended return online Qatar. File an amended return online Saudi Arabia. File an amended return online Syria. File an amended return online United Arab Emirates. File an amended return online Yemen. File an amended return online    For information concerning changes to the list, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Determinations of whether the boycott rule applies. File an amended return online   You may request a determination from the Internal Revenue Service as to whether a particular operation constitutes participation in or cooperation with an international boycott. File an amended return online The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. File an amended return online Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. File an amended return online Public inspection. File an amended return online   A determination and any related background file is open to public inspection. File an amended return online However, your identity and certain other information will remain confidential. File an amended return online Reporting requirements. File an amended return online   You must file a report with the IRS if you or any of the following persons have operations in or related to a boycotting country or with the government, a company, or a national of a boycotting country. File an amended return online A foreign corporation in which you own 10% or more of the voting power of all voting stock but only if you own the stock of the foreign corporation directly or through foreign entities. File an amended return online A partnership in which you are a partner. File an amended return online A trust you are treated as owning. File an amended return online Form 5713 required. File an amended return online   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. File an amended return online See the Instructions for Form 5713 for information on when and where to file the form. File an amended return online Penalty for failure to file. File an amended return online   If you willfully fail to make a report, in addition to other penalties, you may be fined $25,000 or imprisoned for no more than one year, or both. File an amended return online Taxes on Combined Foreign Oil and Gas Income You must reduce your foreign taxes by a portion of any foreign taxes imposed on combined foreign oil and gas income. File an amended return online The amount of the reduction is the amount by which your foreign oil and gas taxes exceed the amount of your combined foreign oil and gas income multiplied by a fraction equal to your pre-credit U. File an amended return online S. File an amended return online tax liability (Form 1040, line 44) divided by your worldwide taxable income. File an amended return online You may be entitled to carry over to other years taxes reduced under this rule. File an amended return online See Internal Revenue Code section 907(f). File an amended return online Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. File an amended return online Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. File an amended return online Taxes of U. File an amended return online S. File an amended return online Persons Controlling Foreign Corporations and Partnerships If you had control of a foreign corporation or a foreign partnership for the annual accounting period of that corporation or partnership that ended with or within your tax year, you may have to file an annual information return. File an amended return online If you do not file the required information return, you may have to reduce the foreign taxes that may be used for the foreign tax credit. File an amended return online See Penalty for not filing Form 5471 or Form 8865 , later. File an amended return online U. File an amended return online S. File an amended return online persons controlling foreign corporations. File an amended return online   If you are a U. File an amended return online S. File an amended return online citizen or resident who had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of that corporation, you may have to file an annual information return on Form 5471, Information Return of U. File an amended return online S. File an amended return online Persons With Respect To Certain Foreign Corporations. File an amended return online Under this rule, you generally had control of a foreign corporation if at any time during your tax year you owned: Stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote, or More than 50% of the total value of shares of all classes of stock of the foreign corporation. File an amended return online U. File an amended return online S. File an amended return online persons controlling foreign partnerships. File an amended return online   If you are a U. File an amended return online S. File an amended return online citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file
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The File An Amended Return Online

File an amended return online Publication 516 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. File an amended return online Tax questions. File an amended return online Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 516, such as treaties effective after it was published, go to www. File an amended return online irs. File an amended return online gov/pub516. File an amended return online What's New U. File an amended return online S. File an amended return online tax treaties and foreign tax laws. File an amended return online  This publication has been expanded to cover U. File an amended return online S. File an amended return online tax treaties and compliance with foreign tax laws. File an amended return online Reminders Combat zone participants. File an amended return online  If you were a civilian who served in a combat zone or qualified hazardous duty area in support of the U. File an amended return online S. File an amended return online Armed Forces, you can get certain extensions of deadlines for filing tax returns, paying taxes, filing claims for refund, and doing certain other tax-related acts. File an amended return online For details, see Publication 3, Armed Forces' Tax Guide. File an amended return online Death due to terrorist or military action. File an amended return online  U. File an amended return online S. File an amended return online income taxes are forgiven for a U. File an amended return online S. File an amended return online Government civilian employee who dies as a result of wounds or injuries incurred while employed by the U. File an amended return online S. File an amended return online Government. File an amended return online The wounds or injuries must have been caused by terrorist or military action directed against the United States or its allies. File an amended return online The taxes are forgiven for the deceased employee's tax years beginning with the year immediately before the year in which the wounds or injury occurred and ending with the year of death. File an amended return online If the deceased government employee and the employee's spouse filed a joint return, only the decedent's part of the joint tax liability is forgiven. File an amended return online For additional details, see Publication 559, Survivors, Executors, and Administrators. File an amended return online Form 8938. File an amended return online  If you had foreign financial assets in 2012, you may have to file Form 8938 with your return. File an amended return online See Foreign Bank Accounts, later. File an amended return online Introduction If you are a U. File an amended return online S. File an amended return online citizen working for the U. File an amended return online S. File an amended return online Government, including the foreign service, and you are stationed abroad, your income tax filing requirements are generally the same as those for citizens and residents living in the United States. File an amended return online You are taxed on your worldwide income, even though you live and work abroad. File an amended return online However, you may receive certain allowances and have certain expenses that you generally do not have while living in the United States. File an amended return online This publication explains: Many of the allowances, reimbursements, and property sales you are likely to have, and whether you must report them as income on your tax return, and Many of the expenses you are likely to have, such as moving expenses and foreign taxes, and whether you can deduct them on your tax return. File an amended return online U. File an amended return online S. File an amended return online possessions. File an amended return online   This publication does not cover the rules that apply if you are stationed in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Virgin Islands, or Puerto Rico. File an amended return online That information is in Publication 570, Tax Guide for Individuals With Income From U. File an amended return online S. File an amended return online Possessions. File an amended return online Comments and suggestions. File an amended return online   We welcome your comments about this publication and your suggestions for future editions. File an amended return online   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. File an amended return online NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File an amended return online Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File an amended return online   You can email us at taxforms@irs. File an amended return online gov. File an amended return online Please put “Publications Comment” on the subject line. File an amended return online You can also send us comments from www. File an amended return online irs. File an amended return online gov/formspubs/. File an amended return online Select “Comment on Tax Forms and Publications” under “Information about. File an amended return online ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. File an amended return online Ordering forms and publications. File an amended return online   Visit www. File an amended return online irs. File an amended return online gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. File an amended return online Internal Revenue Service 1201 N. File an amended return online Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. File an amended return online   If you have a tax question, check the information available on IRS. File an amended return online gov or call 1-800-829-1040. File an amended return online We cannot answer tax questions sent to either of the above addresses. File an amended return online Useful Items - You may want to see: Publication 54 Tax Guide for U. File an amended return online S. File an amended return online Citizens and Resident Aliens Abroad 463 Travel, Entertainment, Gift, and Car Expenses 514 Foreign Tax Credit for Individuals 519 U. File an amended return online S. File an amended return online Tax Guide for Aliens 521 Moving Expenses 523 Selling Your Home Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 1116 Foreign Tax Credit 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3903 Moving Expenses 4868 Application for Automatic Extension of Time To File U. File an amended return online S. File an amended return online Individual Income Tax Return 8938 Statement of Specified Foreign Financial Assets TD F 90-22. File an amended return online 1 Report of Foreign Bank and Financial Accounts See How To Get Tax Help near the end of this publication, for information about getting these publications and forms. File an amended return online Prev  Up  Next   Home   More Online Publications