Explanation statement form 1116 for 2023 tax return

[HOPE2]

Hi everyone,

New client was self-employed in 2023. She received a 1099-NEC from a U.S. employer and also earned wages in Canada, where she stayed for four months. I plan to file Form 1116 for the 2023 tax return, along with a Schedule C.

When I entered the 1099-NEC, an Explanation Statement form popped up. In front of "Form 1116 (Copy 1)," it shows “3, A.” Apparently, this refers to line 3a. However, on the 1116 copy 1, line 3a shows the Standard Deduction amount, and line 3b shows the 1/2 self-employment tax deduction.

What should be included in the Explanation Statement?

Thanks for your help!

[HOPE2]

Could you please help me!

[Michael]

I've always described the amounts that it refers to. As you've surmised "A" refers to column A, and 3 is for line 3. If you look at form 1116 it seems to require an explanation for entries on line 3b, not 3a. There are circumstances in which you would need to include an explanation for amounts on line 3a, but those circumstances don't include the standard deduction. In this case I would say something like "Line 3b - deductible part of self-employment tax: $XXXXX." If you want to you can add that the self-employment tax is from Schedule 1, Part II, line 15, but I generally don't.