Managing Foreign Tax Credit Carryover for Multiple Categories & Form 1116 Filing Issues

The good news is you haven't permanently lost your Foreign Tax Credit carryover from the general category! The IRS allows unused foreign tax credits to be carried forward for 10 years, but there's a catch - you need to document them properly each year, even in years when you don't have new foreign income in that category. When using tax software like TurboTax, it sometimes won't automatically generate a Form 1116 for a category with no current year foreign income. However, you should be able to override this. In TurboTax, look for an option to "Add a Form" or "Other Tax Forms" and manually add Form 1116. Then enter zero for current year foreign income in the general category, but include your carryover amounts from prior years. For your 2022 return specifically, you may need to file an amended return (Form 1040-X) along with the corrected Form 1116 that includes your general category carryover. I'd recommend doing this soon to preserve those credits. For future returns, always make sure all categories with carryover amounts have a Form 1116 filed, even when there's no new income in that category.

I had the exact same issue last year! After struggling with the TurboTax interface for hours, I finally discovered a solution by using taxr.ai (https://taxr.ai) to analyze my previous returns. The tool identified my Foreign Tax Credit carryover situation and provided step-by-step guidance. What worked for me was going into the Forms Search in TurboTax, manually searching for "Form 1116" and forcing it to add the form. Then I had to select "General Category Income" even though it kept trying to remove it. The trick was entering $1 of "other foreign income" in the income section (I put "CARRYOVER DOCUMENTATION" in the description field), then zeroing it out in another section. This forced TurboTax to keep the form while still showing proper zero current-year income. The taxr.ai system analyzed my previous returns and showed exactly where my carryover amounts should appear on the new form. Saved me from potentially losing around $4,700 in foreign tax credits!

I wanted to follow up about my experience using taxr.ai that was recommended here. I was dealing with foreign rental income from Mexico and worried about losing my foreign tax credit carryovers. The service was surprisingly helpful! I uploaded my previous returns and it identified that I had made an error in categorizing some of my foreign income. My rental income should have been in the passive category, not general. It also showed exactly how to document my carryovers in TurboTax when I didn't have new income in certain categories. What impressed me most was how it explained the Form 1116 limitations across different income categories - something none of the standard tax guides had covered clearly. I was able to follow the instructions to properly document my carryovers while avoiding the common mistakes the system identified from my previous filings. Definitely worth checking out if you're dealing with international tax situations. Saved me a ton of research time!

I was in a similar position last year with foreign tax credits from Japan. After spending HOURS on hold trying to reach the IRS for clarification, I finally discovered Claimyr (https://claimyr.com). They got me connected to an actual IRS representative in about 20 minutes instead of the usual endless hold time. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that you absolutely must file Form 1116 every year to maintain your carryover credits, even with zero current foreign income. They explained that many tax software programs don't handle this edge case well, but failing to document the carryover can result in permanently losing those credits. The agent walked me through the proper way to handle it in TurboTax and even sent me additional documentation about foreign tax credit carryovers. Definitely a much better experience than the weeks I spent trying to get through on my own!

I want to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was desperate to resolve my foreign tax credit issue before the filing deadline. Not only did it work exactly as described, but I was connected to an IRS specialist in about 25 minutes (after previously spending 3+ hours on hold multiple times without ever reaching anyone). The agent confirmed everything mentioned in this thread - you need to file Form 1116 every year to maintain your carryover credits, even with zero current foreign income. The agent also explained that I could file an amended return for last year when I failed to document my carryover credits. She walked me through exactly how to complete each section of the form when there's only carryover and no new foreign income. For anyone dealing with complex international tax situations, getting actual IRS guidance made a huge difference. I'm genuinely impressed and apologize for my initial skepticism.

Here's another wrinkle to be aware of: the carryover rules are different depending on which tax treaty applies to your situation. I learned this the hard way with income from Germany. In my case, I had general category income for several years, then nothing for two years, then general category income again. The tax software didn't track my carryovers across the gap years, and I ended up having to recalculate everything manually. Make sure you keep your own records of all your carryover amounts by category, even if you're using tax software. The software might not properly track this across multiple years, especially with gaps in foreign income.

I'm confused about one thing. If you have foreign tax credit carryover from multiple years, how do you determine which year's credits get used first? Is it FIFO (first in, first out) or can you choose?

This is exactly the situation I found myself in last year! I had been working in Singapore from 2018-2020 and accumulated about $2,800 in unused foreign tax credits in the general category. When I returned to the US in 2021, I made the mistake of not filing Form 1116 for general income since I had no new foreign employment income that year. I discovered my error when preparing my 2022 taxes and panicked thinking I'd lost those credits permanently. After doing some research and consulting with a tax professional, I learned I could still recover them by filing an amended return (Form 1040X) for 2021. The key thing I learned is that you MUST file Form 1116 every single year if you have carryover credits, regardless of whether you have new foreign income in that category. Even if it means filing a form that shows zero current year income, it's the only way to preserve your carryover rights. I ended up manually adding the Form 1116 in my tax software by searching for it specifically and forcing it to stay even when the software wanted to remove it due to zero income. The amended return was approved without any issues, and I was able to use those credits against my 2022 and 2023 tax liability. Don't make the same mistake I did - always document those carryovers!