Entity Return

Schedule K-1, line 16, code F is the amount of foreign taxes paid or accrued. Details about international shareholder pro rata share items are reported on Schedules K-2 (filed with Form 1120-S) and K-3 (furnished to each shareholder). See Drake Tax - 1120-S - Schedule K-2 and K-3 for more information about Schedules K-2 and K-3.

Shareholder Returns

For shareholders who receive Schedules K-1 and K-3 reporting international income from an S corporation, data entry is as follows.

1040 or 1041

A shareholder will receive Schedule K-1 with an amount listed in box 16, code F and Schedule K-3. Both items are related to foreign or international income; however, they are entered differently.

Enter the amount reported for foreign taxes paid or accrued on Schedule K-1 on screen K1S > 1120S K1 11-17 tab > line 16, using code F. This amount flows to Form 7203 and is used for basis calculations, but is not carried to Form 1116. Per the 1120-S Schedule K-1 Instructions:

"Report this amount on Form 7203, line 46(a). Do not use this amount to complete your Form 1116. See Schedule K-3 to complete your Form 1116."

Use Schedule K-3 to complete screen 1116 for Form 1116 and calculate any available Foreign Tax credit. See Drake Tax – 1116: Frequently Asked Questions for data entry details. See the Schedule K-3 Instructions for more information on how to use Schedule K-3.

1065 or 1120-S

Pass-through entities that receive information from other pass-through entities cannot use the information to claim any tax credit; the data from the pass-through entity must be re-entered and continue to pass-through until it gets to an individual partner or shareholder who is allowed to take the credit. Use Schedule K-3 to complete the K2 screens of the partnership or S corporation. (Foreign taxes are entered on the III4 screen.)