Hi,
This is for Tax Year 2023 using TurboTax Home & Business Desktop (Mac).
Problem: TurboTax calculates by Foreign Tax Credit to be $0.
Here's my situation:
I received bank interest from some foreign banks. I paid foreign income tax on the bank interest.
The total tax amount is approximately $350.
I chose the option take it as a credit instead of itemized deduction.
- I do not have any other foreign income or foreign taxes
- I have no carryforwards or carrybacks
- I have no expenses against the foreign income
- I have no adjustments to foreign income
- I am married filing jointly
I have entered the bank interest as well as the foreign tax paid via 1099-INT. I did not actually receive any 1099-INT forms - but I entered the information as if I received the forms. I entered the payer name, interest received and, foreign taxes paid in the 1099 form.
I have associated the interest with the correct country and allocated the interest amount received to the tax in the TT screens.
TurboTax Desktop version says I should be able to claim this without filing Form 1116. It then proceeds calculate my tax credit to be $0.
In Forms mode, I do not see either a Schedule 3 or Form 1116 listed in the left navigation bar. However, when I search for Form 1116 I do see that it exists and the calculated amount is 0.
Form 1116 Part III Line 20 is 0 which is then multiplied with the fraction in Line 19 to yield a final amount of $0. I am not sure I understand how Form 1116 works.
I went through the TT screens a few times and sometimes it gives me the following message:
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You've met the requirements for taking the foreign tax credit without filling out Form 1116, but we don't see any foreign tax payments made (or there is no taxable income to apply the foreign tax credit against).
To enter foreign tax payments you must return to the income section of your return to enter foreign taxes paid on interest, dividends, or Schedule K-1 before you continue with the credit.
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I am not sure why the tax credit shows up as $0. Is there some other explanation / solution to claim the full amount foreign tax paid as a credit? I do not believe there should be any kind of "phase-out" for this tax credit as any such phase-out would amount to double taxation.
