Foreign Tax Redeterminations (Estate or Trust)

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Instructions for Schedule C
(Form 1116)

Department of the Treasury
Internal Revenue Service

(December 2021)

Foreign Tax Redeterminations

DRAFT AS OF
November 17, 2021
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Schedule C
(Form 1116) and its instructions, such as
legislation enacted after they were
published, go to IRS.gov/Form1116.

General Instructions

Purpose of Schedule

Schedule C (Form 1116) is used to
identify current year foreign tax
redeterminations in each separate
category, the years to which they relate,
and other information that satisfies your
obligation to notify the IRS of foreign tax
redeterminations that occurred in the
current year that relate to prior years.
Use Part I to report foreign tax
redeterminations that resulted in an
increase in the amount of foreign taxes
accrued and paid by the taxpayer.
Note. If you claim credit for foreign taxes
on the cash basis method of accounting
(you checked the box for “Paid” on Form
1116, Part II), and you pay additional
foreign income taxes that relate to a prior
tax year, that isn’t a foreign tax
redetermination. You don’t report those
additional foreign taxes paid in Part I of
Schedule C. You report those as foreign
taxes paid on Form 1116, Part II, filed for
the tax year in which you paid the
additional foreign taxes.
Use Part II to report foreign tax
redeterminations that resulted in a
decrease in the amount of foreign taxes
paid or accrued by the taxpayer.
Use Part III to report foreign tax
redeterminations that resulted in a change
in the amount of foreign taxes paid or
accrued in any relation back year.
Use Part IV to report foreign tax
redeterminations that resulted in a change
in the U.S. tax liability for any relation back
year or other affected tax year (for
example, by reason of a change in
allowable foreign tax credit carryovers).

Who Must File

Any taxpayer that has a foreign tax
redetermination under section 905(c) must
complete this schedule and attach it to the
Oct 12, 2021

income tax return for the tax year in which
the foreign tax redetermination occurs.
This schedule must be submitted
irrespective of whether the foreign tax
redetermination changed your U.S. tax
liability.

Note. If your U.S. tax liability for any year
changes by reason of the foreign tax
redetermination, you must file an
amended return for the tax year with
respect to which the U.S. tax liability is
adjusted, in addition to filing Schedule C
for the year in which the foreign tax
redetermination occurs. See Foreign Tax
Redeterminations in the Instructions for
Form 1116 for additional information
regarding foreign tax redeterminations that
result in a change in U.S. tax liability and
the related reporting requirements.
If a foreign tax redetermination doesn’t
change the amount of U.S. tax due for any
tax year, you don’t need to file an
amended return. You satisfy your
reporting requirements under Regulations
section 1.905-4(b)(1)(v) with respect to
the foreign tax redetermination by filing a
Schedule C with the return for the tax year
in which the foreign tax redetermination
occurs.

Definitions
Foreign tax redetermination. A foreign
tax redetermination means a change in
the liability for foreign income taxes
including if:
• Accrued foreign taxes when paid or
later adjusted differ from the amounts
claimed as credits (including corrections
to accrued amounts to reflect final foreign
tax liability and additional payments of tax
that accrue after the close of the tax year
to which the tax relates);
• Accrued foreign taxes aren’t paid
within 24 months after the close of the tax
year to which they relate; or
• Any foreign tax paid is fully or partially
refunded.
Relation back year. Relation back year
means the U.S. tax year in which the
foreign taxes being redetermined were
originally taken into account.
Example. In U.S. tax year 1, you took
into account $2 million of Country X
foreign income taxes accrued with respect
to the foreign tax year that ended within
U.S. tax year 1. In year 3, Country X
Cat. No. 37575M

assessed an additional $1 million of taxes
with respect to the foreign tax year that
ended within U.S. tax year 1. The relation
back year is U.S. tax year 1.
Affected tax year. Affected tax year
means any tax year for which the U.S. tax
liability is changed as a result of a foreign
tax redetermination. This includes tax
years in which the U.S. tax liability is
changed as a result of a change in a
carryover of a tax attribute, such as a
foreign tax credit carryover or a net
operating loss carryover, from a relation
back year.

Functional currency. Functional
currency means the dollar, or in the case
of a qualified business unit (QBU), the
currency of the economic environment in
which a significant part of such unit’s
activities are conducted and which is used
by such unit in keeping its books and
records. See section 985(b).

Specific Instructions
Important: All information reported on
Schedule C must be in English. All
amounts must be stated in U.S. dollars,
unless otherwise specified on the
schedule.
If there are more than three payor entities
for a relation back year, attach a statement
that lists all information requested on
Schedule C for those payor entities
following the format of Schedule C. If there
are more than 2 relation back years, or
there are other affected years in addition
to the relation back years (Part IV), attach
a statement that lists all information
requested on Schedule C for those years
following the format of Schedule C.
Checkboxes at top of page 1. Use a
separate Schedule C for each applicable
category of income and check the
corresponding box. Check only one box
for each completed Schedule C.
See Categories of Income in the
Instructions for Form 1116 for additional
information regarding separate categories.
For country codes on lines (h) and (i), see
IRS.gov/CountryCodes for the code to
use.
Parts I, II, III, and IV, column 1. In this
column, enter the ending date of the
relation back year or affected year (Part
IV).

Parts I and II, columns 2a and 2b. In
columns 2a and 2b, enter the name and
the employer identification number (EIN)
or reference ID of the payor. If you paid
the tax directly, enter your name. If the tax
was paid by a pass-through entity in which
you have an ownership interest, such as a
partnership, enter the information for that
entity.
For additional information on EINs and
reference IDs, see Reference ID numbers
in the Instructions for Form 1118.

Column 13. Check the box if the
additional foreign tax paid is a liability that
the taxpayer is continuing to contest with
the foreign jurisdiction.

before the date that is 24 months after the
close of the tax year to which they relate,
there is a resulting foreign tax
redetermination that is accounted for as if
the unpaid portion of the foreign income
taxes were refunded on that date. Credit
may be claimed for those taxes if and
when they are ultimately paid. Foreign
income taxes that first accrue after the
date 24 months after the close of the tax
year to which the taxes relate may not be
claimed as a credit until paid.

Part II

Part III

Column 7. Enter the amounts of
additional tax paid or accrued in the local
currency in which the tax is payable.
Column 8. Enter the amounts of the
additional tax denominated in the
functional currency of the payor that paid
or accrued the additional tax.

DRAFT AS OF
November 17, 2021
Parts I and II, column 3. Enter the
code for the country or U.S. possession to
which tax is paid using the country codes
provided at IRS.gov/CountryCodes.
Parts I and II, column 6. In this
column, enter the payor’s income subject
to tax in the foreign jurisdiction, as
reported on the foreign tax return.

Parts I and II, column 9. Enter the
exchange rate originally used to convert
the local currency in which the
redetermined foreign tax was paid in U.S.
dollars.
Parts I and II, column 11. Enter the
U.S. dollar amount of foreign tax of each
payor entity that was reported by the
taxpayer on its original or amended return
(not taking into account the foreign tax
redetermination).

Part I
Columns 4 and 5. Enter the date the
additional foreign taxes were paid and the
ending date of the foreign tax year to
which such taxes relate.

Columns 4 and 5. In these columns,
enter the date the foreign taxes were
refunded or deemed refunded and the
ending date of the foreign tax year to
which such taxes relate. If the foreign
taxes are deemed refunded by reason of
the section 905(c)(2) two-year rule
described in the Note in the instructions
for column 13, enter in column 4 the date
that is 24 months after the close of the tax
year to which the foreign taxes relate.

Columns 2 and 3. In column 2, enter the
redetermined foreign taxes paid or
accrued. In column 3, enter the foreign
taxes paid or accrued per your original or
previously amended return.

Column 7. Enter the amount of the tax
refunded or deemed refunded in the local
currency in which the tax is payable.

Part IV

Column 8. Enter the amount refunded or
deemed refunded denominated in the
functional currency of the payor that paid
or accrued the refunded amount.
Column 13. Check the box if the foreign
tax redetermination is a result of the
application of the section 905(c)(2)
two-year rule.
Note. Under section 905(c)(2), if accrued
foreign income taxes aren’t paid on or

-2-

Columns 4 and 5. Enter the total amount
of foreign tax credit claimed in the
separate category on your original or
previously amended return and the total
amount of foreign tax credit claimed after
the foreign tax redetermination.

Columns 2 through 4. Enter the total
redetermined U.S. tax liability, the total
U.S. tax liability reported on your original
or previously amended return, and the
difference (subtracting column 3 from
column 2) for each affected tax year.

Additional Information

For more information, see section 905(c)
and Regulations sections 1.905-3,
1.905-4, and 1.905-5.

Instructions for Schedule C (Form 1116) (12-2021)