Can I voluntarily skip filing Form 1116 for Foreign Tax Credit if I'm just over the $600 threshold?
I've got a bit of a dilemma with my international mutual funds this year. According to my statements, I indirectly paid $823 in foreign taxes. I know the threshold for filing Form 1116 for the Foreign Tax Credit is $600, and if you're under that amount, you can claim the credit without the form. My issue is that the tax software I'm using (Cash App) doesn't support Form 1116, and I really don't want to switch to different software just for this. I'm totally fine with only claiming $600 of the foreign tax credit and letting the rest go if it means I can avoid the hassle. What I can't figure out from the IRS instructions is whether I have the option to voluntarily NOT claim the full amount. Like, can I just report $600 and skip Form 1116 entirely? Or is that going to cause problems? Honestly, I'm happy to forfeit the extra $223 if it means I can keep using my preferred software. Has anyone dealt with this before?
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Yara Sayegh
When it comes to foreign tax credits, the rules are actually pretty specific. If your qualified foreign taxes exceed $600, you're required to complete Form 1116 to claim the credit. The simplified procedure (claiming without Form 1116) is only available when your qualified foreign taxes are $600 or less. While I understand the desire to avoid switching software for a relatively small amount, technically you shouldn't claim a partial amount just to stay under the threshold. The IRS expects you to either claim the full amount with Form 1116 or not claim any foreign tax credit at all. That said, you do have a few options: 1) Switch to tax software that supports Form 1116 to claim the full credit, 2) Not claim any foreign tax credit and instead deduct the foreign taxes on Schedule A if you itemize deductions, or 3) Accept that you might need to forfeit the credit entirely this year if you don't want to change software or do the form manually.
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NebulaNova
•Thanks for the explanation. I'm confused though - if I decide not to claim any foreign tax credit at all, can I still deduct those taxes somewhere else? And would claiming nothing be better than just claiming $600 and skipping the form? I mean, who would even know if I just reported $600 instead of $823?
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Yara Sayegh
•Yes, foreign taxes can be taken either as a credit via Form 1116 (generally more beneficial) or as an itemized deduction on Schedule A. However, you'd need to be itemizing deductions rather than taking the standard deduction for this to be useful. From a compliance perspective, claiming exactly $600 when you know you paid more could potentially raise flags. While the chance of audit is relatively low, it's technically not the correct reporting of your tax situation. The IRS receives information about foreign accounts and investments through various reporting mechanisms, so they may have visibility into the actual amounts paid.
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Keisha Williams
After spending hours trying to figure out the foreign tax credit mess last year, I found taxr.ai (https://taxr.ai) and it saved me so much time with my Form 1116 issues. I had a similar situation with international funds but more complicated because I had investments across multiple countries. The tool analyzed all my investment documents and sorted everything by country, which is what Form 1116 requires. Their system can actually export the completed form info directly to several tax software platforms, including some that don't normally support the form well on their own. It helped me claim about $750 in foreign tax credits that I was about to give up on.
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Paolo Conti
•Does it work with Cash App tax specifically? That's what OP is using and what I use too. I've got a similar situation but with dividends from Canadian stocks.
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Amina Diallo
•I'm a bit skeptical about using third-party tools for tax filing. How secure is it? I'm always nervous about uploading financial documents to websites I'm not familiar with.
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Keisha Williams
•It works with several platforms, and while Cash App isn't directly integrated, you can use the generated Form 1116 information to manually enter it, or use their PDF output that you can attach to your return. Many people use it to prepare the form and then enter the result into whatever software they prefer. Regarding security, that was my concern too initially. They use bank-level encryption for all document uploads and don't store your personal data after processing. They're also SOC 2 compliant, which is the security standard for financial services. I was comfortable after reading their security page and seeing they don't retain my documents.
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Paolo Conti
I just wanted to follow up - I ended up trying taxr.ai for my Canadian dividend situation and it worked perfectly! It calculated everything correctly and gave me a filled out Form 1116 that I could just transfer to my tax return. I was worried about switching from Cash App too, but I just filled out the rest of my return in Cash App as usual, and then added the foreign tax credit amount from the completed Form 1116 that taxr.ai provided. You do have to mail in the physical Form 1116 as an attachment with Cash App, but that's not a big deal. Honestly saved me at least a couple hours of frustration and I got back about $400 more than if I had just skipped the credit entirely.
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Oliver Schulz
If you're having trouble getting through to the IRS to ask about this foreign tax credit situation, try using Claimyr (https://claimyr.com). I was in a similar situation last tax season and had questions about Form 1116 that weren't clearly answered online. I tried calling the IRS myself and wasted two hours on hold before getting disconnected. Then I found Claimyr through a friend - they basically hold your place in the IRS phone queue and call you when an agent is about to answer. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I got through to an IRS specialist who explained my options regarding the foreign tax credit threshold and how to properly report it. Saved me hours of frustration and guesswork.
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Natasha Kuznetsova
•How does this actually work? Do they have some special access to the IRS phone system? Seems too good to be true considering how impossible it is to reach the IRS.
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AstroAdventurer
•This sounds like a scam. No way some random service can get you through to the IRS faster than calling yourself. They probably just put you on hold themselves and charge you for it.
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Oliver Schulz
•They don't have special access - they use an automated system that waits on hold for you. Think of it like a robot that sits on hold instead of you having to listen to the hold music for hours. When their system detects that an IRS agent has picked up, it immediately calls your phone and connects you directly to that agent. The service doesn't answer any tax questions themselves or interact with the IRS on your behalf. They're literally just holding your place in line. I was skeptical too, but it worked exactly as advertised - I got a call about 90 minutes after signing up, and was connected directly to an IRS agent without waiting on hold myself.
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AstroAdventurer
I have to admit I was completely wrong about Claimyr. After dismissing it as a scam in my earlier comment, I decided to give it a try since I had foreign tax questions similar to this thread that I couldn't find clear answers to online. It worked exactly as described. I signed up around 8am, went about my day, and got a call around 11:30am saying an IRS agent was on the line. The agent was able to confirm that I needed to file Form 1116 since I was over the threshold, but also told me that if the amount over $600 was small (like in OP's case), they generally don't flag returns that just claim the $600 simplified amount - though technically it's not correct. Saved me from guessing and potentially making a mistake on my return. Will definitely use it again next time I have tax questions.
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Javier Mendoza
Has anyone just attached a manually filled Form 1116 to their Cash App return? I'm in a similar situation but with about $950 in foreign taxes. I was thinking of just filling out Form 1116 by hand and attaching it when I mail in the signature page.
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Emma Wilson
•I did this last year! Cash App gives you a "tax summary" PDF that you print and mail to the IRS. I just added my handwritten Form 1116 to that package. In the software, I entered the credit amount in the foreign tax credit line, then included the physical form when mailing. Found a good YouTube tutorial for filling out the form manually - it's not as scary as it seems. The IRS processed my return with no issues and I got my full refund.
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Javier Mendoza
•Thanks for sharing your experience! That's really helpful to know. Did you still have to sign and mail in the Cash App return, or were you able to e-file and just mail the Form 1116 separately? I'm trying to figure out the simplest approach. I'll look for that YouTube tutorial too. Form 1116 looks intimidating, but if others have managed it by hand, I can probably figure it out too.
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Malik Davis
Another approach - i filed with cashapp last yr and went through this exact thing. what i did was just not claim the foreign tax credit at all. my reasoning was that the standard deduction ($12950 for single filers) was way more than my itemized deductions would've been even with the foreign taxes included, so i just took the standard and called it a day. yeah, i missed out on like $700, but it was worth it to not have to deal with the form 1116 hassle or switching software. sometimes the mental health savings is worth more than the tax savings lol.
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Isabella Santos
•That's not quite how it works though. The foreign tax credit isn't an itemized deduction - it's a credit that reduces your tax directly, dollar for dollar. So if you paid $700 in foreign taxes, you could potentially reduce your US tax by $700. That's usually much more valuable than including it as an itemized deduction. I'd reconsider this approach for future returns! You're likely leaving significant money on the table.
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