Form 1116 for Foreign Tax Credit - Can I voluntarily not file it and forfeit $9?

I've got a bit of a tax headache brewing. Through some international mutual funds I invested in, I indirectly paid $782 in foreign taxes this year. I know the threshold for filing Form 1116 (Foreign Tax Credit) is $600. My issue is that my current tax software (Cash App) doesn't support Form 1116, and I really don't want to switch platforms. I've been using it for years and it's so simple for my situation. What I'm trying to figure out is: can I voluntarily choose NOT to claim the entire credit? Like, if I'm perfectly okay with only claiming $600 of the Foreign Tax Credit and forfeiting the remaining $182, can I just do that and skip Form 1116 entirely? Is there some IRS rule that forces me to claim the full amount? Would the IRS have a problem if I just take the simplified $600 credit without Form 1116? Honestly, I'd rather lose the extra $182 than have to switch tax software or deal with complicated forms. Any guidance would be super appreciated!

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21 comments

Anastasia Ivanova

•8M

You technically have the option to claim up to $600 of qualified foreign taxes paid without filing Form 1116. This is known as the simplified procedure, and it's designed exactly for situations like yours where the paperwork might not be worth the extra credit. The IRS doesn't force you to claim every credit you're entitled to - you can choose to leave money on the table if you want. Since you're under the threshold when you only claim $600, you'd be completely fine just taking that amount and not worrying about Form 1116. Just make sure you meet all the other requirements for the simplified procedure: the foreign taxes must be from passive income (like dividends from your mutual funds), reported on a qualified payee statement (like your 1099), and other criteria listed in the instructions.

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Anastasia Ivanova

•8M

There's no issue with switching between the simplified credit and filing Form 1116 from year to year. The IRS expects that your situation might change annually, and they don't view this as suspicious at all. You simply use whichever method is appropriate for your situation each tax year. If your foreign taxes exceed $600 in a future year and you want the full credit, you'd file Form 1116 for that year. This won't trigger any red flags related to your previous simplified claims. Just be sure you're meeting all the requirements for whichever method you choose each year.

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StarStrider

•8M

I was in almost this exact situation last year with $730 in foreign taxes from my Vanguard international funds! I was using TurboTax and didn't want to upgrade just for Form 1116. I found this awesome service called taxr.ai (https://taxr.ai) that helped me figure out what to do without switching my main tax software. I uploaded my 1099 documents, and they analyzed everything and explained that I could either take the simplified $600 credit or showed me exactly how to fill out Form 1116 manually to get the full amount. The analysis they provided made it super clear what my options were and what I'd be giving up.

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StarStrider

•8M

The service doesn't file forms for you - it analyzes your tax documents and gives you detailed guidance. You still use your regular tax software, but taxr.ai helps with the forms your software doesn't support. They explain exactly what to enter where if you're doing it manually. Their security is really good - they use bank-level encryption and delete your documents after analysis. The cost is reasonable compared to upgrading tax software packages, especially if you only need help with one specific form. Unlike Google searches, they give personalized advice based on your actual documents rather than generic instructions that might not apply to your situation.

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Luca Marino

•8M

I need to follow up about my experience with taxr.ai after being skeptical in my earlier comment. I decided to try it for my foreign tax credit situation with some Fidelity international funds. I was pleasantly surprised! The system analyzed my 1099s and showed me that my situation qualified for the simplified method. Saved me tons of time trying to figure out Form 1116. The step-by-step guidance was personalized to my actual numbers and way clearer than the generic IRS instructions. Even better, they explained that I could claim exactly $600 without Form 1116, and showed me what I'd be giving up (about $145 in my case). I decided the simplicity was worth it and stayed with my preferred tax software. Definitely using this again next year!

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Nia Davis

•8M

If you need to actually contact the IRS about the Foreign Tax Credit rules, good luck getting through on their phone lines! After trying for THREE DAYS to speak with someone about Form 1116 last year, I finally discovered Claimyr (https://claimyr.com) which got me through to an actual IRS agent in under 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone tree for you and call you back when they've got an agent on the line. The agent confirmed that I could absolutely choose to take just the $600 simplified credit even though I was eligible for more.

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Nia Davis

•8M

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Luca Marino

•8M

I have to eat my words about Claimyr. After my skeptical comment, I was still desperate to talk to the IRS about some foreign tax reporting questions, so I gave it a shot. Holy crap, it actually worked! I've NEVER been able to get through to the IRS before. They called me back in about 15 minutes and had an IRS agent on the line. The agent confirmed I could take the simplified $600 credit and forfeit the rest without any issues. Saved me from switching tax software and from hours of hold music. I'm actually shocked this exists and works. Would have paid double for this service during tax season when it's impossible to get through.

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Aisha Rahman

•8M

The excess foreign tax credit can be carried forward for up to 10 years. So you have quite a long time to use it up on future tax returns if you choose to file Form 1116 this year. If your situation stays similar in future years, this could actually be beneficial. You could potentially use up that excess credit in a year where maybe your foreign taxes are lower than $600. The main consideration is whether the long-term benefit outweighs the short-term hassle of dealing with Form 1116 now.

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Isaiah Sanders

•5M

Just wanted to chime in as someone who's dealt with this exact situation! You absolutely can choose to only claim the $600 simplified credit and forfeit the remaining $182. The IRS doesn't require you to claim every credit you're entitled to - it's your choice. I've been doing this for the past two years with my international index funds because my tax software doesn't support Form 1116 either. Never had any issues with the IRS. The simplified method is specifically designed for situations like yours where the paperwork complexity isn't worth the extra credit. Just make sure your foreign taxes qualify for the simplified procedure (sounds like they do since they're from mutual funds). You're definitely not the only one who'd rather keep things simple and leave a little money on the table!

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