AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
1116 AMT and Foreign Tax Credit 1116: Difference
Posted by: kuku, February 20, 2010 07:21PM
Hi,
I am filing a Foreign Tax credit 1116 for some part of my income as it has been doubly taxed. This is in general income category
My question is :
DO we need to file 2 1116 forms a>Foreign Tax Credit 1116 b> AMT Foreign Tax credit.

Form mentioned at a is calculated automatically by software (HR block) but in case of b it states that I need to manually calculate it.

Any pointers on difference in calculation to this would be very helpful.
AMT tax tool at IRS states that I need not file 6251





Re: 1116 AMT and Foreign Tax Credit 1116: Difference
Posted by: Kaye Thomas, February 22, 2010 09:19PM
If you've correctly determined that you don't have to file Form 6251, then you don't have to file an AMT version of Form 1116. That's because you wouldn't owe AMT even if your AMT foreign tax credit is zero -- again, assuming you've correctly determined you don't have to file a 6251.

In theory, even if you don't owe AMT, you might benefit from doing an AMT version of Form 1116 to carry unused AMT foreign tax credit back or forward to a different year. If your situation is complicated enough for that to be an issue you should probably be relying on a tax pro rather than software from HR Block.

If you want more detail on this you can download the 6251 instructions from the IRS website using this link:

[www.irs.gov]

Kaye Thomas
Fairmark.com

Re: 1116 AMT and Foreign Tax Credit 1116: Difference
Posted by: kuku, February 22, 2010 10:52PM
Kaye,
Thanks for the reply.
I think my situation is simple and the tax software can handle this. But I am having doubts when I am trying to compare last year's filing with this year's filing.

Before any more details I tried IRS AMT tool states that no need to file 6251 ( I tried updating 6251 form and line 36 of Form 6251 is 0).


**********To elaborate further from last years computation:***********


Last year I took help of a tax accountant and he filed two 1116 ( normal and AMT and no 6251 form ). Pls note that AMT tool used in IRS still states no need to file 6251 for 2008. I did this now as an additional verification.

Comparison of two 1116 forms form last year:

In both 1116 all entries were same till we reached line 17. (Line 17 Instructions -->Individuals: Enter the amount from Form 1040, line 41). Line 41 of 1040= Adjusted Gross Income (AGA)- Deductions(D).

From here onwards the two 1116 starts taking different values.

Entered Values from last year's tax computations:

*In Normal 1116 line 17= AGA-D.
*In AMT 1116 line 17 = AGA.

Thus tax credit in normal 1116 is TC1 and tax credit is TC2. ( TC1>TC2). Foreign tax credit claimed= TC1 in 2008 tax filing.
Federal carry over in foreign Tax Credit Carry over to 2009 is = TC1-TC2.

**********************************My Doubt*************************

1>Is this right approach? (AMT tax tools states that I don't need 6251 for 2009 and well as 2008). I am not sure if the accountant's approach was correct. Do I need to file revised tax for 2008? If accountant's approach seems to be different form what you suggested then I might just try to compute AMT 1116 this year too.

2> This year I have a small foreign income tax credit ( FITC). WHat should I do with the carryover from last year. Can I claim it as tax credit in addition to the normal tx credit(NTC) in the software i.e total foreign tax credit = NTC+ (TC1-TC2) ? If I don't claim it this year can I claim it in some next year?


Thanks And Regards,



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