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Free State E Filing

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Free State E Filing

Free state e filing Publication 510 - Introductory Material Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Excise Taxes Not Covered What's New Medical device excise tax. Free state e filing  The Affordable Care Act (the “Act”) (Public Law 111-148, amended by Public Law 111-152) imposes a 2. Free state e filing 3% (. Free state e filing 023) excise tax on the sale of certain medical devices by the manufacturer, producer, or importer of the device. Free state e filing The tax applies to sales of taxable medical devices after December 31, 2012. Free state e filing See Taxable Medical Devices in chapter 5, later. Free state e filing Tax on seasonal flu vaccines. Free state e filing  Sales of all vaccines against seasonal influenza are now subject to the section 4131 excise tax at the existing rate of $. Free state e filing 75 per dose of taxable vaccine. Free state e filing Previously, only trivalent influenza vaccines were subject to this tax. Free state e filing See Vaccines in chapter 5, later. Free state e filing Patient-centered outcomes research fee. Free state e filing  The Act imposes a fee on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4576) to help fund the Patient-Centered Outcomes Research Institute. Free state e filing The fee, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, is based on the average number of lives covered under the policy or plan. Free state e filing The fee applies to policy or plan years ending on or after October 1, 2012. Free state e filing See chapter 11, later. Free state e filing Extension of fuel tax credits. Free state e filing  The following section 6426 credits, previously expired on December 31, 2011, are retroactively extended. Free state e filing Biodiesel or renewable diesel mixture credit. Free state e filing Alternative fuel credit. Free state e filing Alternative fuel mixture credit. Free state e filing See Notice 2013–26 (fuel tax credits) on page 984 of I. Free state e filing R. Free state e filing B. Free state e filing 2013–18 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb13-18. Free state e filing pdf; also see chapter 2, later. Free state e filing Alternative fuel mixture credit can be claimed on Schedule C (Form 720) only. Free state e filing  For alternative fuel mixtures produced after December 31, 2011, the section 6426 alternative fuel mixture credit can be claimed on Schedule C (Form 720) only, not on Form 4136, Credit for Federal Tax Paid on Fuels, or Schedule 3 (Form 8849), Claim for Refund of Excise Taxes, and only to the extent of your section 4081 taxable fuel liability for gasoline, diesel, and kerosene. Free state e filing See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit in chapter 2, later. Free state e filing Expiration of alcohol fuel mixture credit. Free state e filing  The section 6426 alcohol fuel mixture credit expired after December 31, 2011. Free state e filing Expiration of alcohol fuels credits. Free state e filing  The section 40 alcohol, alcohol mixture, and small ethanol producer credits expired after December 31, 2011. Free state e filing Second generation biofuel producer credit and excise tax. Free state e filing  The section 40 cellulosic biofuel producer credit was retroactively extended to include fuel sold or used through January 2, 2013. Free state e filing After January 2, 2013, cellulosic biofuel is renamed second generation biofuel, which adds algae-based fuel. Free state e filing The second generation biofuel producer credit is for fuel sold or used after January 2, 2013, and before January 1, 2014. Free state e filing You are liable for an excise tax on each gallon of cellulosic or second generation biofuel at the rate you used to figure the credit if you do not use the fuel for the purposes described under Qualified Cellulosic Biofuel Production or Qualified Second Generation Biofuel Production, later. Free state e filing Report the tax on Form 720. Free state e filing See Cellulosic or Second Generation Biofuel Not Used as Fuel, later; also see Form 6478, Biofuel Producer Credit, for more information. Free state e filing Extension of section 40A biodiesel fuels credit. Free state e filing  The biodiesel fuels credit, previously expired on December 31, 2011, is retroactively extended. Free state e filing Future developments. Free state e filing  The IRS has created a page on IRS. Free state e filing gov that includes information about Publication 510 at www. Free state e filing irs. Free state e filing gov/pub510. Free state e filing Information about any future developments will be posted on that page. Free state e filing Reminders Publication 510 updates. Free state e filing  Publication 510 is not updated annually. Free state e filing Instead, it will be updated only when there are major changes in the tax law. Free state e filing Use of international air travel facilities. Free state e filing  Generally, the tax on the use of international air travel facilities increases annually. Free state e filing See the Instructions for Form 720 for the tax rate. Free state e filing For more information, see Air Transportation Taxes in chapter 4. Free state e filing Aviation fuels for use in foreign trade. Free state e filing  Aviation gasoline and kerosene for use in aviation are exempt from the leaking underground storage tank (LUST) tax. Free state e filing Arrow shafts, tax rate. Free state e filing  Generally, the tax on arrow shafts increases annually. Free state e filing See Form 720 for the tax rate. Free state e filing Disregarded entities and qualified subchapter S subsidiaries. Free state e filing  Qualified subchapter S subsidiaries (QSubs) and eligible single-owner disregarded entities are treated as separate entities for excise tax and reporting purposes. Free state e filing QSubs and eligible single-owner disregarded entities must pay and report excise taxes (other than IRS Nos. Free state e filing 31, 51, and 117), register for most excise tax activities, and claim any refunds, credits, and payments under the entity's employer identification number (EIN). Free state e filing These actions cannot take place under the owner's taxpayer identification number (TIN). Free state e filing Some QSubs and disregarded entities may already have an EIN. Free state e filing However, if you are unsure, please call the IRS Business and Specialty Tax line at 1-800-829-4933. Free state e filing Generally, QSubs and eligible single-owner disregarded entities will continue to be treated as disregarded entities for other federal tax purposes (other than employment taxes). Free state e filing For more information on these regulations, see Treasury Decision (T. Free state e filing D. Free state e filing ) 9356, T. Free state e filing D. Free state e filing 9462, and T. Free state e filing D. Free state e filing 9596. Free state e filing You can find T. Free state e filing D. Free state e filing 9356 on page 675 of Internal Revenue Bulletin (I. Free state e filing R. Free state e filing B. Free state e filing ) 2007-39 at  www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb07-39. Free state e filing pdf;  T. Free state e filing D. Free state e filing 9462 on page 504 of I. Free state e filing R. Free state e filing B. Free state e filing 2009-42 at  www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb09-42. Free state e filing pdf;  and T. Free state e filing D. Free state e filing 9596 on page 84 of I. Free state e filing R. Free state e filing B. Free state e filing 2012-30 at  www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb12-30. Free state e filing pdf. Free state e filing Registration for certain activities. Free state e filing  You are required to be registered for certain excise tax activities, such as blending of gasoline, diesel fuel, or kerosene outside the bulk transfer/terminal system. Free state e filing See the instructions for Form 637 for the list of activities for which you must register. Free state e filing Also see Registration Requirements under Fuel Taxes in chapter 1 for information on registration for activities related to fuel. Free state e filing Each business unit that has, or is required to have, a separate employer identification number must be registered. Free state e filing To apply for registration, complete Form 637 and provide the information requested in its instructions. Free state e filing If your application is approved, you will receive a Letter of Registration showing the activities for which you are registered, the effective date of the registration, and your registration number. Free state e filing A copy of Form 637 is not a Letter of Registration. Free state e filing Photographs of missing children. Free state e filing  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free state e filing Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free state e filing You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free state e filing Introduction This publication covers the excise taxes for which you may be liable and which are reported on Form 720 and other forms. Free state e filing It also covers fuel tax credits and refunds. Free state e filing For information on fuel credits against income tax (the section 40 credits for the production of cellulosic biofuel and second generation biofuel, and the section 40A credit for biodiesel and renewable diesel used as fuel) see the instructions for Form 6478 and Form 8864, Biodiesel and Renewable Diesel Fuels Credit. Free state e filing Comments and suggestions. Free state e filing   We welcome your comments about this publication and your suggestions for future editions. Free state e filing   You can write to us at the following address: Internal Revenue Service Individual and Specialty Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Free state e filing NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free state e filing Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free state e filing   You can email us at taxforms@irs. Free state e filing gov. Free state e filing Please put “Publications Comment” on the subject line. Free state e filing You can also send us comments from www. Free state e filing irs. Free state e filing gov/Forms-&-Pubs/More-Information/ and select “Comment on Tax Forms and Publications”. Free state e filing   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. Free state e filing Useful Items - You may want to see: Publication 509 Tax Calendars Form (and Instructions) 11-C Occupational Tax and Registration Return for Wagering 637 Application for Registration (For Certain Excise Tax Activities) 720 Quarterly Federal Excise Tax Return 720X Amended Quarterly Federal Excise Tax Return 730 Monthly Tax Return for Wagers 1363 Export Exemption Certificate 2290 Heavy Highway Vehicle Use Tax Return 2290(SP) Declaración del Impuesto sobre el Uso de Vehículos Pesados en las Carreteras 4136 Credit for Federal Tax Paid on Fuels 6197 Gas Guzzler Tax 6478 Biofuel Producer Credit 6627 Environmental Taxes 8849 Claim for Refund of Excise Taxes, and Schedules 1–3, 5, 6, and 8 8864 Biodiesel and Renewable Diesel Fuels Credit Information Returns    Form 720-TO, Terminal Operator Report Form 720-CS, Carrier Summary Report   See How To Get Tax Help in chapter 17 for information about ordering forms and publications. Free state e filing Guidance    You can find Notice 2005-4 (fuel tax guidance) on page 289 of I. Free state e filing R. Free state e filing B. Free state e filing 2005-2 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb05-02. Free state e filing pdf. Free state e filing Notice 2005-62 (biodiesel and aviation-grade kerosene) on page 443 of I. Free state e filing R. Free state e filing B. Free state e filing 2005-35 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb05-35. Free state e filing pdf. Free state e filing Notice 2005-80 (LUST, kerosene, claims by credit card issuers, and mechanical dye injection) on page 953 of I. Free state e filing R. Free state e filing B. Free state e filing 2005-46 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb05-46. Free state e filing pdf. Free state e filing Notice 2006-92 (alternative fuels and alternative fuel mixtures) on page 774 of I. Free state e filing R. Free state e filing B. Free state e filing 2006-43 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb06-43. Free state e filing pdf. Free state e filing Notice 2008-110 (biodiesel and cellulosic biofuel) on page 1298 of I. Free state e filing R. Free state e filing B. Free state e filing 2008-51 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb08-51. Free state e filing pdf. Free state e filing Notice 2010-68 (Alaska dyed diesel exemption) on page 576 of I. Free state e filing R. Free state e filing B. Free state e filing 2010-44 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb10-44. Free state e filing pdf. Free state e filing Notice 2012-27 (fractional aircraft ownership programs fuel surtax) on page 849 of I. Free state e filing R. Free state e filing B. Free state e filing 2012-17 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb12-17. Free state e filing pdf. Free state e filing Notice 2013-26 (fuel tax credits) on page 984 of I. Free state e filing R. Free state e filing B. Free state e filing 2013-18 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb13-18. Free state e filing pdf. Free state e filing T. Free state e filing D. Free state e filing 9604 and Notice 2012–77 (medical device tax) on pages 730 and 781, respectively, of I. Free state e filing R. Free state e filing B. Free state e filing 2012-52 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb12-52. Free state e filing pdf. Free state e filing T. Free state e filing D. Free state e filing 9602 (patient-centered outcomes research fee) on page 746 of I. Free state e filing R. Free state e filing B. Free state e filing 2012-52 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb12-52. Free state e filing pdf. Free state e filing Revenue Procedure 2012-41 (inflation adjustments) on page 539 of I. Free state e filing R. Free state e filing B. Free state e filing 2012-45 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb12-45. Free state e filing pdf. Free state e filing T. Free state e filing D. Free state e filing 9621 (indoor tanning services tax) on page 49 of I. Free state e filing R. Free state e filing B. Free state e filing 2013-28 at www. Free state e filing irs. Free state e filing gov/pub/irs-irbs/irb13-28. Free state e filing pdf. Free state e filing Excise Taxes Not Covered In addition to the taxes discussed in this publication, you may have to report certain other excise taxes. Free state e filing For tax forms relating to alcohol, firearms, and tobacco, visit the Alcohol and Tobacco Tax and Trade Bureau website at www. Free state e filing ttb. Free state e filing gov. Free state e filing Heavy highway vehicle use tax. Free state e filing   You report the federal excise tax on the use of certain trucks, truck tractors, and buses used on public highways on Form 2290, Heavy Highway Vehicle Use Tax Return. Free state e filing The tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. Free state e filing Vans, pickup trucks, panel trucks, and similar trucks generally are not subject to this tax. Free state e filing Note. Free state e filing A Spanish version (Formulario 2290(SP)) is also available. Free state e filing See How To Get Tax Help in chapter 17. Free state e filing Registration of vehicles. Free state e filing   Generally, you must prove that you paid your heavy highway vehicle use tax to register your taxable vehicle with your state motor vehicle department or to enter the United States in a Canadian or Mexican registered taxable vehicle. Free state e filing Generally, a copy of Schedule 1 (Form 2290) is stamped by the IRS and returned to you as proof of payment. Free state e filing    If you have questions on Form 2290, see its separate instructions, or you can call the Form 2290 call site at 1-866-699-4096 (toll free) from the United States, and 1-859-669-5733 (not toll free) from Canada and Mexico. Free state e filing The hours of service are 8:00 a. Free state e filing m. Free state e filing to 6:00 p. Free state e filing m. Free state e filing Eastern time. Free state e filing Wagering tax and occupational tax. Free state e filing   The information on wagering tax can be found in the instructions for Form 730, Tax on Wagering, and Form 11-C, Occupational Tax and Registration Return for Wagering. Free state e filing Prev  Up  Next   Home   More Online Publications

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Free state e filing 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. Free state e filing S. Free state e filing 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. Free state e filing S. Free state e filing 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. Free state e filing S. Free state e filing 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. Free state e filing Employee business expenses. Free state e filing 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. Free state e filing You can change your choice for each year's taxes. Free state e filing To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. Free state e filing S. Free state e filing tax return. Free state e filing However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. Free state e filing See How To Figure the Credit , later. Free state e filing To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. Free state e filing Figure your tax both ways—claiming the credit and claiming the deduction. Free state e filing Then fill out your return the way that benefits you more. Free state e filing See Why Choose the Credit, later. Free state e filing 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. Free state e filing If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. Free state e filing You cannot deduct any of them. Free state e filing Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. Free state e filing You cannot take a credit for any of them. Free state e filing See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. Free state e filing There are exceptions to this general rule, which are described next. Free state e filing Exceptions for foreign taxes not allowed as a credit. Free state e filing   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. Free state e filing Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. Free state e filing S. Free state e filing tax purposes. Free state e filing For more information, see Internal Revenue Code section 901(m). Free state e filing The IRS intends to issue guidance that will explain this provision in greater detail. Free state e filing   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. Free state e filing Foreign taxes that are not income taxes. Free state e filing   In most cases, only foreign income taxes qualify for the foreign tax credit. Free state e filing Other taxes, such as foreign real and personal property taxes, do not qualify. Free state e filing But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. Free state e filing   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. Free state e filing However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). Free state e filing Carrybacks and carryovers. Free state e filing   There is a limit on the credit you can claim in a tax year. Free state e filing 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. Free state e filing If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. Free state e filing That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. Free state e filing   For more information on the limit, see How To Figure the Credit , later. Free state e filing For more information on carrybacks and carryovers, see Carryback and Carryover , later. Free state e filing 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. Free state e filing You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. Free state e filing Example. Free state e filing You paid foreign taxes for the last 13 years and chose to deduct them on your U. Free state e filing S. Free state e filing income tax returns. Free state e filing You were timely in both filing your returns and paying your U. Free state e filing S. Free state e filing tax liability. Free state e filing 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. Free state e filing Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). Free state e filing Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. Free state e filing Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. Free state e filing 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. Free state e filing 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. Free state e filing 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. Free state e filing 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. Free state e filing 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. Free state e filing See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. Free state e filing 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. Free state e filing In most cases, if the foreign tax rate is higher than the U. Free state e filing S. Free state e filing rate, there will be no U. Free state e filing S. Free state e filing tax on the foreign income. Free state e filing If the foreign tax rate is lower than the U. Free state e filing S. Free state e filing rate, U. Free state e filing S. Free state e filing tax on the foreign income will be limited to the difference between the rates. Free state e filing The foreign tax credit can only reduce U. Free state e filing S. Free state e filing taxes on foreign source income; it cannot reduce U. Free state e filing S. Free state e filing taxes on U. Free state e filing S. Free state e filing source income. Free state e filing 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. Free state e filing This is because: A credit reduces your actual U. Free state e filing S. Free state e filing 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. Free state e filing 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. Free state e filing (See Limit on credit under How To Figure the Credit, later. Free state e filing ) Example 1. Free state e filing For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. Free state e filing None of the dividends are qualified dividends. Free state e filing You file a joint return and can claim two $3,900 exemptions. Free state e filing You had to pay $2,000 in foreign income taxes on the dividend income. Free state e filing If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. Free state e filing Your taxable income then is $57,500 and your tax is $7,736. Free state e filing If you take the credit instead, your itemized deductions are only $13,000. Free state e filing Your taxable income then is $59,500 and your tax before the credit is $8,036. Free state e filing After the credit, however, your tax is only $6,036. Free state e filing Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. Free state e filing Example 2. Free state e filing In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. Free state e filing You report on your U. Free state e filing S. Free state e filing return this income as well as $56,000 of U. Free state e filing S. Free state e filing source wages and an allowable $49,000 partnership loss from a U. Free state e filing S. Free state e filing partnership. Free state e filing Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. Free state e filing You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. Free state e filing If you deduct the foreign tax on your U. Free state e filing S. Free state e filing 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. Free state e filing 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. Free state e filing You can take a credit of only $113 because of limits discussed later. Free state e filing Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. Free state e filing If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). Free state e filing 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. Free state e filing 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. Free state e filing “Tax year” refers to the tax year for which your U. Free state e filing S. Free state e filing return is filed, not the tax year for which your foreign return is filed. Free state e filing Accrual method of accounting. Free state e filing   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Free state e filing 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. Free state e filing   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. Free state e filing Generally, this occurs on the last day of the tax year for which your foreign return is filed. Free state e filing Contesting your foreign tax liability. Free state e filing   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. Free state e filing 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. Free state e filing Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. Free state e filing 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 . Free state e filing You may have to post a bond. Free state e filing   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. Free state e filing   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. Free state e filing Cash method of accounting. Free state e filing   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. Free state e filing 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. Free state e filing Choosing to take credit in the year taxes accrue. Free state e filing   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. Free state e filing You make the choice by checking the box in Part II of Form 1116. Free state e filing 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. Free state e filing   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. Free state e filing You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. Free state e filing   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. Free state e filing Credit based on taxes paid in earlier year. Free state e filing   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. Free state e filing Example. Free state e filing Last year you took the credit based on taxes paid. Free state e filing This year you chose to take the credit based on taxes accrued. Free state e filing During the year you paid foreign income taxes owed for last year. Free state e filing You also accrued foreign income taxes for this year that you did not pay by the end of the year. Free state e filing 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. Free state e filing Foreign Currency and Exchange Rates U. Free state e filing S. Free state e filing income tax is imposed on income expressed in U. Free state e filing S. Free state e filing dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. Free state e filing Therefore, fluctuations in the value of the foreign currency relative to the U. Free state e filing S. Free state e filing dollar may affect the foreign tax credit. Free state e filing Translating foreign currency into U. Free state e filing S. Free state e filing dollars. Free state e filing   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. Free state e filing S. Free state e filing dollars. Free state e filing How and when you do this depends on your functional currency. Free state e filing In most cases, your functional currency is the U. Free state e filing S. Free state e filing dollar unless you are required to use the currency of a foreign country. Free state e filing   You must make all federal income tax determinations in your functional currency. Free state e filing The U. Free state e filing S. Free state e filing dollar is the functional currency for all taxpayers except some qualified business units. Free state e filing A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. Free state e filing Unless you are self-employed, your functional currency is the U. Free state e filing S. Free state e filing dollar. Free state e filing   Even if you are self-employed and have a qualified business unit, your functional currency is the U. Free state e filing S. Free state e filing dollar if any of the following apply. Free state e filing You conduct the business primarily in dollars. Free state e filing The principal place of business is located in the United States. Free state e filing You choose to or are required to use the dollar as your functional currency. Free state e filing 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. Free state e filing   If your functional currency is the U. Free state e filing S. Free state e filing dollar, you must immediately translate into dollars all items of income, expense, etc. Free state e filing , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Free state e filing If there is more than one exchange rate, use the one that most properly reflects your income. Free state e filing In most cases, you can get exchange rates from banks and U. Free state e filing S. Free state e filing Embassies. Free state e filing   If your functional currency is not the U. Free state e filing S. Free state e filing dollar, make all income tax determinations in your functional currency. Free state e filing At the end of the year, translate the results, such as income or loss, into U. Free state e filing S. Free state e filing dollars to report on your income tax return. Free state e filing    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. Free state e filing   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. Free state e filing If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. Free state e filing 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. Free state e filing   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). Free state e filing Exception. Free state e filing   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. Free state e filing This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. Free state e filing The foreign taxes are paid on or after the first day of the tax year to which they relate. Free state e filing The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. Free state e filing The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). Free state e filing (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. Free state e filing )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. Free state e filing Election to use exchange rate on date paid. Free state e filing   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. Free state e filing If any of the accrued taxes are unpaid, you must translate them into U. Free state e filing S. Free state e filing dollars using the exchange rate on the last day of the U. Free state e filing S. Free state e filing tax year to which those taxes relate. Free state e filing 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. Free state e filing S. Free state e filing dollar functional currency. Free state e filing 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. Free state e filing The election is available for tax years beginning after 2004. Free state e filing 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. Free state e filing Make the election by attaching a statement to the applicable tax return. Free state e filing 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. Free state e filing S. Free state e filing dollar functional currency. Free state e filing Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. Free state e filing S. Free state e filing foreign tax credit claimed. Free state e filing 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. Free state e filing If a foreign tax redetermination occurs, a redetermination of your U. Free state e filing S. Free state e filing tax liability is required if any of the following conditions apply. Free state e filing The accrued taxes when paid differ from the amounts claimed as a credit. Free state e filing 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. Free state e filing If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. Free state e filing You will not be allowed a credit for the unpaid taxes until you pay them. Free state e filing When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. Free state e filing S. Free state e filing dollars using the exchange rate as of the date they were paid. Free state e filing The foreign tax credit is allowed for the year to which the foreign tax relates. Free state e filing See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. Free state e filing The foreign taxes you paid are refunded in whole or in part. Free state e filing 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. Free state e filing 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. Free state e filing S. Free state e filing tax year. Free state e filing In this case, you must adjust your U. Free state e filing S. Free state e filing tax in the tax year in which the accrued foreign taxes are paid. Free state e filing 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. Free state e filing S. Free state e filing tax liability for each tax year affected by the redetermination. Free state e filing In most cases, you must file Form 1040X, Amended U. Free state e filing S. Free state e filing Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. Free state e filing S. Free state e filing tax liability for the year or years affected. Free state e filing See Contents of statement , later. Free state e filing 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. Free state e filing There are other exceptions to this requirement. Free state e filing They are discussed later under Due date of notification to IRS . Free state e filing Contents of statement. Free state e filing   The statement must include all of the following. Free state e filing Your name, address, and taxpayer identification number. Free state e filing The tax year or years that are affected by the foreign tax redetermination. Free state e filing The date or dates the foreign taxes were accrued, if applicable. Free state e filing The date or dates the foreign taxes were paid. Free state e filing The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. Free state e filing 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. Free state e filing   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. Free state e filing   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). Free state e filing Due date of notification to IRS. Free state e filing   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. Free state e filing There is no limit on the time the IRS has to redetermine and assess the correct U. Free state e filing S. Free state e filing tax due. Free state e filing 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. Free state e filing S. Free state e filing taxes. Free state e filing See Time Limit on Refund Claims , later. Free state e filing   Exceptions to this due date are explained in the next two paragraphs. Free state e filing Multiple redeterminations of U. Free state e filing S. Free state e filing tax liability for same tax year. Free state e filing   Where more than one foreign tax redetermination requires a redetermination of U. Free state e filing S. Free state e filing 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. Free state e filing 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. Free state e filing However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. Free state e filing S. Free state e filing tax liability is required may occur after the due date for providing that notification. Free state e filing In this situation, you may have to file more than one Form 1040X for that tax year. Free state e filing Additional U. Free state e filing S. Free state e filing tax due eliminated by foreign tax credit carryback or carryover. Free state e filing   If a foreign tax redetermination requires a redetermination of U. Free state e filing S. Free state e filing tax liability that would otherwise result in an additional amount of U. Free state e filing S. Free state e filing 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. Free state e filing 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. Free state e filing You must file the statement by the due date (with extensions) of that return. Free state e filing 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. Free state e filing S. Free state e filing tax liability is required). Free state e filing Failure-to-notify penalty. Free state e filing   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. Free state e filing   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. Free state e filing S. Free state e filing tax. Free state e filing This penalty cannot be more than 25% of the tax due. Free state e filing Foreign tax refund. Free state e filing   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. Free state e filing S. Free state e filing tax for the time before the date of the refund. Free state e filing   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. Free state e filing 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. Free state e filing Interest also is owed from the time you receive a refund until you pay the additional tax due. Free state e filing Foreign tax imposed on foreign refund. Free state e filing   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. Free state e filing 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. Free state e filing Example. Free state e filing 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. Free state e filing When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. Free state e filing Time Limit on Refund Claims You have 10 years to file a claim for refund of U. Free state e filing S. Free state e filing tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. Free state e filing 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. Free state e filing You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. Free state e filing 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). Free state e filing The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. Free state e filing See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. Free state e filing Who Can Take the Credit? U. Free state e filing S. Free state e filing citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. Free state e filing S. Free state e filing tax on foreign source income may be able to take a foreign tax credit. Free state e filing U. Free state e filing S. Free state e filing Citizens If you are a U. Free state e filing S. Free state e filing citizen, you are taxed by the United States on your worldwide income wherever you live. Free state e filing You are normally entitled to take a credit for foreign taxes you pay or accrue. Free state e filing 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. Free state e filing S. Free state e filing citizens. Free state e filing If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. Free state e filing 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. Free state e filing For information on alien status, see Publication 519. Free state e filing Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. Free state e filing 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. Free state e filing S. Free state e filing possession on income from foreign sources that is effectively connected with a trade or business in the United States. Free state e filing But if you must pay tax to a foreign country or U. Free state e filing S. Free state e filing possession on income from U. Free state e filing S. Free state e filing sources only because you are a citizen or a resident of that country or U. Free state e filing S. Free state e filing possession, do not use that tax in figuring the amount of your credit. Free state e filing For information on alien status and effectively connected income, see Publication 519. Free state e filing 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. Free state e filing The tax must be imposed on you. Free state e filing You must have paid or accrued the tax. Free state e filing The tax must be the legal and actual foreign tax liability. Free state e filing The tax must be an income tax (or a tax in lieu of an income tax). Free state e filing Certain foreign taxes do not qualify for the credit even if the four tests are met. Free state e filing See Foreign Taxes for Which You Cannot Take a Credit, later. Free state e filing 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. Free state e filing S. Free state e filing possession. Free state e filing For example, a tax that is deducted from your wages is considered to be imposed on you. Free state e filing You cannot shift the right to claim the credit by contract or other means. Free state e filing Foreign country. Free state e filing   A foreign country includes any foreign state and its political subdivisions. Free state e filing Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. Free state e filing U. Free state e filing S. Free state e filing possessions. Free state e filing   For foreign tax credit purposes, all qualified taxes paid to U. Free state e filing S. Free state e filing possessions are considered foreign taxes. Free state e filing For this purpose, U. Free state e filing S. Free state e filing possessions include Puerto Rico and American Samoa. Free state e filing   When the term “foreign country” is used in this publication, it includes U. Free state e filing S. Free state e filing possessions unless otherwise stated. Free state e filing 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. Free state e filing S. Free state e filing possession. Free state e filing 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. Free state e filing Joint return. Free state e filing   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. Free state e filing Combined income. Free state e filing   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. Free state e filing 901-2(f)(3)(iii). Free state e filing 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. Free state e filing   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. Free state e filing 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. Free state e filing For more details, see paragraphs (f) and (h) of Regulations section 1. Free state e filing 901-2. Free state e filing For similar rules applicable to prior tax years, see Regulations section 1. Free state e filing 901-2 (revised as of April 1, 2011). Free state e filing Example. Free state e filing You and your spouse reside in Country X, which imposes income tax on your combined incomes. Free state e filing Both of you use the “u” as your functional currency. Free state e filing Country X apportions tax based on income. Free state e filing You had income of 30,000u and your spouse had income of 20,000u. Free state e filing Your filing status on your U. Free state e filing S. Free state e filing income tax return is married filing separately. Free state e filing You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. Free state e filing S income tax return. Free state e filing Your spouse can claim only 40% (20,000u/50,000u). Free state e filing Partner or S corporation shareholder. Free state e filing   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. Free state e filing These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. Free state e filing 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. Free state e filing Beneficiary. Free state e filing   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. Free state e filing This amount will be shown on the Schedule K-1 you receive from the estate or trust. Free state e filing However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. Free state e filing Mutual fund shareholder. Free state e filing   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. Free state e filing 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. Free state e filing If you do not receive this information, you will need to contact the fund. Free state e filing Controlled foreign corporation shareholder. Free state e filing   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. Free state e filing If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. Free state e filing Controlled foreign corporation. Free state e filing   A controlled foreign corporation is a foreign corporation in which U. Free state e filing S. Free state e filing shareholders own more than 50% of the voting power or value of the stock. Free state e filing You are considered a U. Free state e filing S. Free state e filing shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. Free state e filing See Internal Revenue Code sections 951(b) and 958(b) for more information. Free state e filing 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. Free state e filing Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. Free state e filing Foreign tax refund. Free state e filing   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. Free state e filing   For example, the United States has tax treaties with many countries allowing U. Free state e filing S. Free state e filing citizens and residents reductions in the rates of tax of those foreign countries. Free state e filing However, some treaty countries require U. Free state e filing S. Free state e filing 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. Free state e filing 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. Free state e filing Subsidy received. Free state e filing   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. Free state e filing 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. Free state e filing 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. Free state e filing   The term “subsidy” includes any type of benefit. Free state e filing Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Free state e filing Shareholder receiving refund for corporate tax in integrated system. Free state e filing   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. Free state e filing You may be able to claim a refund of these taxes from the foreign government. Free state e filing You must include the refund (including any amount withheld) in your income in the year received. Free state e filing Any tax withheld from the refund is a qualified foreign tax. Free state e filing Example. Free state e filing You are a shareholder of a French corporation. Free state e filing You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. Free state e filing The French government imposes a 15% withholding tax ($15) on the refund you received. Free state e filing You receive a check for $85. Free state e filing You include $100 in your income. Free state e filing The $15 of tax withheld is a qualified foreign tax. Free state e filing 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. Free state e filing Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. Free state e filing 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. Free state e filing See Taxes in Lieu of Income Taxes , later. Free state e filing 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. Free state e filing A foreign levy is an income tax only if it meets both of the following requirements. Free state e filing It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. Free state e filing The predominant character of the tax is that of an income tax in the U. Free state e filing S. Free state e filing sense. Free state e filing A foreign levy may meet these requirements even if the foreign tax law differs from U. Free state e filing S. Free state e filing tax law. Free state e filing The foreign law may include in income items that U. Free state e filing S. Free state e filing law does not include, or it may allow certain exclusions or deductions that U. Free state e filing S. Free state e filing law does not allow. Free state e filing Specific economic benefit. Free state e filing   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. Free state e filing   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. Free state e filing   However, see the exception discussed later under Pension, unemployment, and disability fund payments . Free state e filing Economic benefits. Free state e filing   Economic benefits include the following. Free state e filing Goods. Free state e filing Services. Free state e filing Fees or other payments. Free state e filing Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. Free state e filing Discharges of contractual obligations. Free state e filing   In most cases, the right or privilege merely to engage in business is not an economic benefit. Free state e filing Dual-capacity taxpayers. Free state e filing   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. Free state e filing ” 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. Free state e filing    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. Free state e filing   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. Free state e filing    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. Free state e filing For more information about these agreements, see Publication 54. Free state e filing Soak-up taxes. Free state e filing   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. Free state e filing 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. Free state e filing This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. Free state e filing Penalties and interest. Free state e filing   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. Free state e filing Taxes not based on income. Free state e filing   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. Free state e filing Taxes based on assets, such as property taxes, do not qualify for the credit. Free state e filing 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. Free state e filing 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. Free state e filing A tax in lieu of an income tax does not have to be based on realized net income. Free state e filing A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. Free state e filing In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. Free state e filing 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. Free state e filing The soak-up tax. Free state e filing 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. Free state e filing Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. Free state e filing 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. Free state e filing S. Free state e filing persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. Free state e filing Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. Free state e filing S. Free state e filing gross income. Free state e filing 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. Free state e filing S. Free state e filing income under the foreign earned income exclusion or the foreign housing exclusion. Free state e filing See Publication 54 for more information on the foreign earned income and housing exclusions. Free state e filing Wages completely excluded. Free state e filing   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. Free state e filing Wages partly excluded. Free state e filing   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. Free state e filing 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. Free state e filing   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. Free state e filing Deductible expenses do not include the foreign housing deduction. Free state e filing   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). Free state e filing If the foreign law taxes foreign earned income and some other income (for example, earned income from U. Free state e filing S. Free state e filing sources or a type of income not subject to U. Free state e filing S. Free state e filing 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. Free state e filing Example. Free state e filing You are a U. Free state e filing S. Free state e filing citizen and a cash basis taxpayer, employed by Company X and living in Country A. Free state e filing 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. Free state e filing To find that part, do the following. Free state e filing First, find the amount of business expenses allocable to excluded wages and therefore not deductible. Free state e filing To do this, multiply the otherwise deductible expenses by a fraction. Free state e filing That fraction is the excluded wages over your foreign earned income. Free state e filing   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. Free state e filing To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). Free state e filing The result is $81,984. Free state e filing 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). Free state e filing Finally, multiply the foreign tax you paid by the resulting fraction. Free state e filing   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. Free state e filing Taxes on Income From Puerto Rico Exempt From U. Free state e filing S. Free state e filing 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. Free state e filing For information on figuring the reduction, see Publication 570. Free state e filing 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. Free state e filing For more information on this exclusion, see Publication 570. Free state e filing Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. Free state e filing However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. Free state e filing 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. Free state e filing However, you can claim an itemized deduction for these taxes. Free state e filing See Choosing To Take Credit or Deduction , earlier. Free state e filing 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. Free state e filing The following countries meet this description for 2013. Free state e filing Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. Free state e filing Cuba. Free state e filing Iran. Free state e filing Libya (but see Note later). Free state e filing North Korea. Free state e filing Sudan. Free state e filing Syria. Free state e filing Waiver of denial of the credit. Free state e filing   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. Free state e filing S. Free state e filing companies in the sanctioned country. Free state e filing 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. Free state e filing Note. Free state e filing Effective December 10, 2004, the President granted a waiver to Libya. Free state e filing Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. Free state e filing Limit on credit. Free state e filing   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. Free state e filing You must fill out a separate Form 1116 for this income. Free state e filing This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. Free state e filing Example. Free state e filing You lived and worked in Iran until August, when you were transferred to Italy. Free state e filing You paid taxes to each country on the income earned in that country. Free state e filing You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. Free state e filing Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. Free state e filing You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. Free state e filing Figuring the credit when a sanction ends. Free state e filing    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. Free state e filing 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. Free state e filing Example. Free state e filing The sanctions against Country X ended on July 31. Free state e filing On August 19, you receive a distribution from a mutual fund of Country X income. Free state e filing The fund paid Country X income tax for you on the distribution. Free state e filing 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. Free state e filing Amounts for the nonsanctioned period. Free state e filing   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. Free state e filing Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. Free state e filing   Number of nonsanctioned days in year  Number of days in year Example. Free state e filing 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. Free state e filing Sanctions against Country X ended on July 11, 2013. Free state e filing You are unable to determine how much of the income or tax is for the nonsanctioned period. Free state e filing 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. Free state e filing You would compute the income for the nonsanctioned period as follows. Free state e filing 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. Free state e filing 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. Free state e filing Further information. Free state e filing   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. Free state e filing This Cumulative Bulletin can be found in many libraries and IRS offices. Free state e filing Table 1. Free state e filing 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. Free state e filing 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. Free state e filing 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). Free state e filing 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. Free state e filing If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. Free state e filing 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. Free state e filing 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. Free state e filing Withholding tax. Free state e filing   For this purpose, withholding tax includes any tax determined on a gross basis. Free state e filing It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Free state e filing Ex-dividend date. Free state e filing   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. Free state e filing Example 1. Free state e filing You bought common stock from a foreign corporation on November 3. Free state e filing You sold the stock on November 19. Free state e filing You received a dividend on this stock because you owned it on the ex-dividend date of November 5. Free state e filing 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). Free state e filing Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. Free state e filing Example 2. Free state e filing The facts are the same as in Example 1 except that you sold the stock on November 14. Free state e filing You held the stock for only 11 days. Free state e filing You are not entitled to the credit. Free state e filing Exception. Free state e filing   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. Free state e filing See section 901(k)(4) of the Internal Revenue Code for more information. Free state e filing 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. Free state e filing 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. Free state e filing Withholding tax. Free state e filing   For this purpose, withholding tax includes any tax determined on a gross basis. Free state e filing It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Free state e filing Exception for dealers. Free state e filing   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. Free state e filing See section 901(I)(2) of the Internal Revenue Code for more information. Free state e filing 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. Free state e filing A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. Free state e filing S. Free state e filing tax purposes but not for foreign tax purposes. Free state e filing For more information, see Internal Revenue Code section 901(m). Free state e filing The IRS intends to issue guidance that will explain this provision in greater detail. Free state e filing 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. Free state e filing 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. Free state e filing For details, see Regulations section 1. Free state e filing 901-3. Free state e filing 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. Free state e filing See the instructions for line 12 in the Form 1116 instructions to figure this reduction. Free state e filing 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. Free state e filing List of boycotting countries. Free state e filing   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. Free state e filing As of November 2013, the following countries are listed. Free state e filing Iraq. Free state e filing Kuwait. Free state e filing Lebanon. Free state e filing Libya. Free state e filing Qatar. Free state e filing Saudi Arabia. Free state e filing Syria. Free state e filing United Arab Emirates. Free state e filing Yemen. Free state e filing    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. Free state e filing   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. Free state e filing The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. Free state e filing Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. Free state e filing Public inspection. Free state e filing   A determination and any related background file is open to public inspection. Free state e filing However, your identity and certain other information will remain confidential. Free state e filing Reporting requirements. Free state e filing   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. Free state e filing 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. Free state e filing A partnership in which you are a partner. Free state e filing A trust you are treated as owning. Free state e filing Form 5713 required. Free state e filing   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. Free state e filing See the Instructions for Form 5713 for information on when and where to file the form. Free state e filing Penalty for failure to file. Free state e filing   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. Free state e filing 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. Free state e filing 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. Free state e filing S. Free state e filing tax liability (Form 1040, line 44) divided by your worldwide taxable income. Free state e filing You may be entitled to carry over to other years taxes reduced under this rule. Free state e filing See Internal Revenue Code section 907(f). Free state e filing Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. Free state e filing Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. Free state e filing Taxes of U. Free state e filing S. Free state e filing 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. Free state e filing 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. Free state e filing See Penalty for not filing Form 5471 or Form 8865 , later. Free state e filing U. Free state e filing S. Free state e filing persons controlling foreign corporations. Free state e filing   If you are a U. Free state e filing S. Free state e filing 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. Free state e filing S. Free state e filing Persons With Respect To Certain Foreign Corporations. Free state e filing 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. Free state e filing U. Free state e filing S. Free state e filing persons controlling foreign partnerships. Free state e filing   If you are a U. Free state e filing S. Free state e filing citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file