The following relates to the Turbo Tax worksheet for Form 1116.
1) The problem is in the ratio computation in lines 12a1-5. The taxpayer has earned foreign income over the exclusion amount of 105,900 and the spouse does not. My understanding is that the ratio should be computed separately for EACH taxpayer. Then each ratio is multiplied by the taxes paid by each taxpayer. Then the TWO reductions are combined. Below is an example of my understanding followed by the Turbo tax computation which combines the incomes of both taxpayers and computes a SINGLE ratio. You will see the results are NOT the same.
| | | | | | |
| | Taxpayer | Spouse | | | |
| L12a1 | 127,000 | 76,000 | | | |
| L12a2 | 172,000 | 76,000 | | | |
| Ratio | 0.7384 | 1 | | | |
| | | | | | |
| Taxes Paid | 14,000 | 4,000 | | | |
| | | | | | |
| Reduction Taxes Paid X Ratio | | | |
| | 10,337 | 4,000 | 14,337 | Reduction Amount |
| | | | | | |
| Turbo Tax computation | | | | |
| | | | | | |
| | Taxpayer | Spouse | Total | | |
| L12a1 | 127,000 | 76,000 | 203,000 | | |
| L12a2 | 172,000 | 76,000 | 248,000 | | |
| Ratio | | | 0.8185 | | |
| | | | | | |
| Taxes Paid | 14,000 | 4,000 | 18,000 | | |
| Reduction Taxes Paid X Ratio | 14,734 | Reduction Amount |
| | | | | | |
| | Difference | | 397 | | |
2) Also after selection box d (at the top) there is a boxed area with a drop-down option. What at the circumstances when: Neither, Taxpayer, Spouse, or Both should be checked?
Thanks . Any help is appreciated.
