How do I generate the Form 1116 - Schedule B Foreign Tax Carryover Reconciliation Schedule?
Starting with tax year 2021, the IRS has expanded Form 1116 to include a Schedule B. This new schedule is used to "reconcile [the taxpayer's] prior year foreign tax
carryover with [their] current year foreign
tax carryover." Use the steps below to generate Schedule B. Follow the guidelines below.
- Starting in Drake21, there is a global option available under Setup > Options > Calculation & View/Print > Elect to Claim FTC without filing Form 1116 when possible. When this is marked, Form 1116 may not be generated if the taxpayer meets the requirements. This also prevents the Form 1116 Schedule B from producing and no carryforward amounts are allowed. See KB 11619 for details on the election and other general information.
- An override for the global option may be found on the ELEC screen.
- Prior-year carryforwards flow directly from Schedule B in total to Form 1116, Part III, Line 10. Carryforwards to next year flow to Wks Carry.
To enter FTC carryovers, first, create Form 1116 to report any current year foreign income and/or tax paid/accrued by entering applicable data on the DIV, INT, or 1116 screen(s).* Then, click the blue link 1116 Sch B Foreign Tax Carryovers on the 1116 screen:
Enter the details for the type of income taxed and carryover information for the 10th-5th preceding years on the first tab, and then the 4th through 1st preceding years on the second tab.
- If the Foreign Tax Credit Carryover is subject to regular tax and AMT, you will need to enter a separate screen (Page Down) reporting the numbers on each. The checkbox Numbers on this screen are for AMT calculations on the carryover screen that is for AMT.
- A separate screen will need to be created to report carryovers for each type of income taxed. It is very important that the Type of income taxed drop lists on the 1116 and 1116B screens match (EF Message 0351 generates is there is a mismatch).
In the view mode, Form 1116 Sch B and Form 1116 Sch B pg 2 are generated to calculate and reconcile the tax credit amounts for the current and prior years.
The schedule must be attached as a PDF to the return. Once the return is complete, click Attach PDF in view mode and the required attachment will be created and attached (see EF message 0261 below for details).
In prior years, the carryover was tracked outside the software. The carryover was entered on screen 1116, Part III, line 10 and a SCH screen was required. Amounts should not be entered on line 10 for Drake21.
*If there is a FTC carryover, but there is no current year FTC, complete the following minimum entries on the 1116 screen:
- Type of income taxed
- Line 7 (if Foreign income was received in the current year, even if no foreign tax was paid or accrued.)
EF message 0261 generates to
indicate that a PDF attachment has not been attached. If the return is
complete, click Attach PDF in view mode to attach the required PDF then
recalculate the return to clear the red message page.
EF Message 5022 generates if a carryover has been entered on the 1116 screen, line 10 or the AMT carryover field. The data entry screen discussed above should be used to enter the detailed carryover information instead of those lines.
For more information about Form 1116 including setup options related to the form, see Related Links below.
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