Hi @pk . Please see a follow up question below in bold/italics:
The interest income is from Canadian banks. But TurboTax says on form 1116 "Do not enter any income already reported on Form 1099-INT" but I have also paid tax on this interest income. If I can't report it on form 1116, my foreign tax credit will be lower and I will be taxed again on this income in the U.S.
Interest income from Foreign sources is reported as interest income as part of your world income ( with NO 1099-INT ) -- you tell TurboTax that this is interest without a 1099-INT -- it will accept that data.
If I go to enter this income as part of my "world income" as you stated above under the "foreign income and exclusion" section , TT gives me 4 options and none of them seem appropriate to enter interest income:
A regular form W-2 from your employer
A Form 1099-MISC or other self-employment income
A statement from my foreign employer (could be cash)
An IRS Schedule K-1 from a business partnership
So the question is, how exactly do I enter this interest income so that I can claim a FTC against it? The issue as I stated earlier is that when you are on form 1116 for FTC purposes, TT says "do not enter any income you already reported (for example on form 1099-INT, 1099-MISC, etc.", so I need to enter this interest income in a way that I can then claim additional FTC as I paid Canada almost 20% tax on this foreign interest.
On form 1116 , you select category " Passive" and report this income again as foreign sourced income and the taxes you paid/allocated to this income. Note that if this tax is equal or under the Safe Harbor threshold then you should use that rather than form 1116. But how do I do this when I am only using one 1116 form
