This flowchart deals with redeterminations of U.S. tax liability as a result of foreign tax redeterminations (changes in the foreign income tax liability). For cash method taxpayers, refunds of foreign income taxes that were claimed as foreign tax credits in a prior year generally requires a redetermination of U.S. tax liability (i.e., the filing of an amended tax return) for the prior year. For accrual method taxpayers, a redetermination of the U.S. tax liability (i.e., the filing of an amended tax return) may be required if (1) the accrued taxes are not paid within 24 months after the end of the year the taxes are accrued, (2) if there is an over or under accrual of foreign taxes, or (3) if the dollar value of the tax when paid differs from the dollar value of the tax when accrued in excess of a de minimis amount.
The chart also addresses when to accrue foreign income taxes that are being contested by the taxpayer. Generally, contested foreign income taxes cannot be accrued until the taxes are paid or there is a final determination where the taxes are no longer contested.
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