How to generate Form 1118 Foreign Tax Credit-Corporations in Lacerte

Follow these steps:

1. Go to Screen 30, Foreign Tax Credit (1118).
2. In the General Information subsection, select the Foreign country, US possession or special case code from the dropdown.
3. Select the Category of income from the dropdown.
4. Scroll to Schedule B - Foreign Taxes Paid, Accrued, and Deemed Paid and enter applicable amounts.
5. Enter any Separate Limitation Gross Income.

Categories of Income

A separate credit should be calculated for each applicable category of income.  There are 4 categories of income currently allowed for Form 1118:

• Passive Category Income
• Section 901(j) Income
• Income Re-sourced by Treaty
• General Category Income

For additional information on each category of income, refer to the Instructions for Form 1118.

Carryback and carryforward of excess foreign taxes

If the allowable foreign taxes paid, accrued, or deemed paid in a tax year in a separate category exceed the foreign tax credit limitation for the tax year for that separate category, the excess may be:

• Carried back 1 year to offset taxes imposed in the same category.
• Carried forward 10 years to offset taxes imposed in the same category.

The excess is applied first to the earliest of the years to which it may be carried, then to the next earliest year, etc. The corporation may not carry a credit to a tax year for which it claimed a deduction, rather than a credit for foreign taxes paid or accrued.

• The input for carryback and carryover of excess foreign taxes is located on Screen 30, Foreign Tax Credit (1118).
• This input will appear on Form 1118, Page 2 - Schedule B, Line 4, Total carryover of foreign taxes (attach schedule showing computation in detail).