1116: foreign tax reduction prop to FEIE

[orioncarrier]

Hi everyone,

I'm new to ATX and struggling a bit. I have a client who needs to use both the foreign earned income exemption (FEIE) for her earned income, and the foreign tax credit for both general and passive baskets. I've entered three items of passive income, and the one item of general income that is not eligible for the FEIE, into the Details screen of form 1116. ATX has added a separate, uneditable entry for the FEIE exemption below a heading "Form 2555". (I've attached screenshots).

I need to reduce foreign taxes proportional to the FEIE. I am accustomed to being able to hand enter the reduction amount. I'm unsure on what basis ATX is pre-calculating this figure, as it depends on a ratio, the numerator of which is the exemption amount, and the denominator is the total foreign taxes paid, which I haven't entered anywhere in ATX. Can anyone tell me how to change this value, or what to change to get it to change?

There are fields in the Details table for "General Limitation Numerator" and "General Limitation Denominator", but no indication on the screen what those values mean. On the row containing my non-exempt general basket income, for some reason these fields both contain my exemption amount (??), and the tax reduction is the full amount of the taxes allocated to the income item (??).

I've experimented with changing the numerator so that it applies a ratio to my allocated taxes that results in the tax reduction I want, but then for some reason it makes the income in line 1a on the 1116 a large negative amount. (??)

Any insight on how to control the output for tax reduction will be appreciated.

[Margaret CPA in OH]

Have you entered this on the Input sheet for 1116?  It looks as if there is a place to make the adjustment you need.   (t) and (u) have lines for General Limitation adjustment to numerator and denominator.  With the input sheet it appears that you have the ability to customize both for each item that you are listing.

IF I understand the issue....

[orioncarrier]

Thanks very much, Margaret! Sorry I didn't respond. For some reason I was not notified of this response. 

I see what you're saying about the Input Screen. However, I wouldn't know what customisations to put in those fields. I haven't been able to find any documentation at all on what the numerator/denominator field are for or what they do. Can you point me to any?

The Support line was not able to help me, other than entering an override for the reduction in taxes and the income after reduction. I don't like that because it means there is functionality I don't understand, and neither does the average support person.

Thanks very much for your input!

[Margaret CPA in OH]

orioncarrier, I directed you there because your original post, in paragraph two, stated that you were accustomed to hand entering a reduction amount and referenced the numerator and denominator which would adjust the final figures.  I've never had to do anything like that but was assuming that you knew what the outcome should be but not quite how to get there.  If those adjusting fields cannot provide what you believe is correct, I honestly have no clue how else to get there.  Perhaps try some figures and see what happens.

You are correct that the average support person doesn't understand much at all.  Sometimes, alas, even the the higher levels and programmers don't either so the burden is on us to know what the outcome should be and not rely 100% on the software - much as we would like to.  Perhaps the most expensive software will jump through all the hoops for us but I doubt it.  I think annually or so, some organizations presents a set of data for various tax firms and software to determine the correct result and rarely do they all agree.

Do your best, sorry I couldn't be of more help.