Foreign Tax Credit Form 1116

This tax thing is never ending.

I'm just a tiny bit confused on how to get the numbers needed for the 1116.  I think I have a fairly straightforward situation, and I really only need help getting the number I am supposed to put on line 1a - 'gross income from all sources in the UK'.

I'm self employed, so does this mean everything I took in (all sales before subtracting the amount I paid for raw materials, postage, etc), or does it mean PROFIT?

And then do I add interest earned on UK bank accounts to that?

I'm using Turbo Tax and it seems to automatically calculate my 'gross income from all sources' on line 3e, and it's more than all of my income added together, so I don't understand what goes into that either.

Thanks for any help you might be able to give!

Hi,

I can't advise on whether you should be reporting gross income or your profit but aside from that:

1a should be your total income from that category (e.g. General). This is generally the same number as entered on line 3d.

3e should be equal to or larger than this number and includes income in other sources (e.g. passive).

As an example, say all of your income is foreign. You earn 95k in general income and 5k in passive income. Assume also that you can credit 100% of your US tax liability:

You will file two form 1116s, one for general income and one for passive.

On the general form, lines 1a and 3d will show the 95k.
Line 3e will show 100k (95 + 5).

This will result in line 3f being 0.9500 and the form will go on to credit 95% of your US tax liability against the general income category.

On the second form 1116 for passive income, lines 1a and 3d will show the 5k.
Line 3e will show 100k and 3f will come out as 0.0500, which will go on to credit the final 5% of your US tax liability against the Passive income category.

To use myself as an example, all of my taxable income came from a salary and bank interest. Line 1a from 1116 (general) came from line 7 of form 1040 and line 3e (1116 general) came from line 22 of form 1040

I hope this helps.

Thank you, it does! I think I've worked it all out now.