Form 1116 Two Category Method Election?

[George Boutwell]

OK, so my software has a box to check under "Global Information" on the Form 1116 worksheet, for "elect to use the two category method."

I have no idea what they are talking about, but if I check it the return goes from a $15,000 balance due to a $2,000 refund. The Form 1116, however, has one number and LIne 47, Form 1040, has another.

In the Form 1116 instructions, the only references to categories seems to be in dealing with capital gains and losses. There aren't many of those, and none of them are foreign.

Does anyone know what they are talking about?

[Corduroy Frog]

Fast Tax

Go to work for your local "Fast Tax" stores on the corner on 5th and Main. You know, where tax professionals have been reduced to keypunch operators.

Then you can not only get him a refund without having to look up the difference, you can also charge him for a RAL...

Client says, "Y'all need to take your taxes down to that Boutwell guy down at Fast Tax. I thought I was going to have to pay but he got me back $2000!! Last year I went to Grahme Wellington, PhD, CPA, EA but this Boutwell guy knows a lot more than him..."

[Roland Slugg]

Childishness

Dear Corduroy Frog

Your sarcastic and insulting remaks directed at Mr. Boutwell are offensive.

F-1116 is one of the most complicated tax forms there is, and no one should blame anyone for seeking help about it. It's possible Mr. Boutwell did spend at least some time trying to research the issue before posting here. It's also possible his software, which he did not name, has a programming glitch, or that he entered something improperly. That would not be difficult to do on a form as complex as F-1116.

Mr. Boutwell, if the FTC on the return in question is in the $17,000 range, it's entirely possible your software is doing everything correctly. It's also common for F-1116 to indicate a larger maximum credit than actually appears on F-1040 due to various limitations. When you elect to use the two category method, you will have different limitations for the categories.

[Corduroy Frog]

Whoa, Sluggo!!

Roland, you're reading something into this that wasn't intended.

Boutwell and I have had differences, but this was aimed at the "Fast Tax" industry and not George. I've accused him of about everything, but I've never accused him of being dumb. And yes, he did have a legitimate question. I'm glad someone else responded to the post because I was dumbfounded by the software option myself.

This is one of my biggest complaints of the tax prep industry -- the public actually believes the most knowledgeable tax expert is the one who gets them back the most money. When in reality, data entry can itself create a big refund out of an errant keypuncher. And the training of a CPA, EA or other professional takes a back seat to the borderline skills of someone only trained to keypunch W-2s and 1099s.

This was my emphasis, Roland - Boutwell just happened to be the name who launched the tirade. If the dapper gentleman Burton Koss had started the same thread, it would have been Burton instead of George. Sorry if you took offense.

By the way, I have enjoyed reading your posts. Wish we would hear more from you.

The Frog

[George Boutwell]

100 Years From Now It Won't Make Any Difference

I was amused, not offended (although there was more truth than humor in your observation of how many practitioners would handle this situation).

I called tech support a few days ago and (as can be expected, because these people know more about software and hardware than the Internal Revenue Code) the person I spoke with had no idea why the bottom line on the 1116 was different by $17,000 from the amount carried over to the Form 1040. He was going to refer it to some of their tax experts. I told him I wasn't in a hurry because I would be away from the office for a few days, and my client would be away from his Eastern European home for a couple weeks. I haven't heard back, although I received an email asking me to evaluate my experience with tech support.

Trying to diagnose the problem, I opened the same client's 2005 return, found the same box on the Form 1116 and checked it. This made no difference in the tax.

[Roland Slugg]

Aahhh, that explains it

Sorry C. Frog ... didn't realize you were being "tongue-in-cheek." When I read your reply, it came across, to me at least, as a pretty nasty condemnation. I should have questioned my reaction, as your other posts have been free of sarcasm.

Thank you for your own kind words. I've been thinking of posting a series of commentary ... perhaps weekly or bi-weekly ... about various issues of wide interest that I believe are important and worthy of review, contemplation, discussion and/or debate. If the response is generally positive, I'll continue them until I run out of ideas.

[Corduroy Frog]

Have at it

Your stuff has always been good to read. Posting commentaries on tax items weekly is a good idea -- collect thoughts from others. That's what this board should be about.

Corduroy Frog