When you go thru the foreign tax interview, the screen with the header Foreign-Source Income states you reported $XXXX of total income from a specific 1099-DIV. How much was from foreign countries?
That amount displayed is the total of 1a + 2a +2b+2c+2d+3. From the payer's supplemental info, you will be able to extract from box 1a the foreign ordinary dividends (qualified +unqualified) and the foreign qualified dividends. The difficulty is to extract the foreign amount from the remaining boxes.
In most cases, this cannot be done, so the amounts in these boxes can be considered domestic and will have no bearing on foreign transactions. Box 2a especially causes issues. It is the capital gains that mutual funds/ETF's incur when they sell stocks and pass the amount to the shareholders to be taxed. The problem is that we have no way of knowing whether the stocks were sold on a U.S. or a foreign exchange or both. The result is from the payer's supplemental info, if it cannot be determined with certainty the foreign amount of any box, assume it is domestic and ignore it for foreign purposes.
The following procedure displays how the dividends inter-relate.
Open a new spreadsheet.
Column A is used for both qualified and unqualified dividends, aka. “Ordinary dividends”.
Column B is used for qualified dividends only.
In cell A1, insert the worldwide ordinary dividends. This is the amount in the 1099-div, box 1a.
In cell A2, insert the foreign ordinary dividends. This amount is derived from the broker’s supplemental info.
In cell A3, subtract A2 from A1. The result is the U.S sourced ordinary dividends.
In cell B1, insert the worldwide qualified dividends. This is the amount in the 1099-div box 1b.
In cell B2, insert the foreign qualified dividends. This amount is derived from the broker’s supplemental info.
In cell B3, subtract B2 from B1. The result is the U.S. sourced qualified dividends.
Each cell in column A must be equal to or greater than the corresponding cell in column B. If that is not the case then there is an error. Recheck all entries..
During the interview, it will ask for the foreign-source income. That is the amount in cell A2. As stated above, no other foreign income can be determined, if any.
Later it may ask for foreign sourced qualified dividends and LT cap. gains. That is the amount in cell B2. As stated above, the foreign LT gains are ignored because the foreign amount, if any, cannot be determined.
