Form 1116

By: Pete
Date posted: 01.03.2012 (5:00 am) | Write a Comment  (0 Comments)

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As discussed in my last post about form 2555, today I had to spend some time filling out form 1116. Why? It should have been obvious from the start that i was going to need to fill form 1116. That is the form that makes it possible to get credit for taxes paid to foreign governments (as long as there are existing agreements between the US and that government). As a Canadian resident, I’ve paid a significant amount of taxes to the Canadian government, which is the main reason why I do not expect to have to pay any residual amounts to the IRS.

Here are the relevant links for 2011 (I was using the 2010 forms this time around):

Actual Form 1116
IRS Guide for Form 1116

Filing Several Forms 1116?

The bad news is that you need to get separate credits depending on the types of income. Fortunately, 99% of my income is generated from employee work in Canada so I was able to get enough credits by only filing one and selecting b (General Category Income).

Then, I was able to fill Part I which is also very simple in my case. I only had to enter one number really, in 9-1a). And since I’ve only paid taxes in one country. I used the same total of income that had been used in form 1040, in US dollars. That number ended up being my total for 1A and my total for line 7.

Then, for part II, I actually took into account all taxes paid to the Canadian federal and provincial governments and put them into a spreadsheet, then converted that amount into $USD. It ended up being about a third of my income total.

I do think that there might have been a way for me to diminish my income total using a variety of deductions that are possible. In my case, I did not really need those. I then filled in part 3 and part 4, which I will try to do with actual numbers but basically, I was able to get credit for the amount in line 30, which I can then report to form 1040, line 47.

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