I have foreign taxes paid of $610.47 on line 7 of form 1099-DIV. All of the foreign taxes paid were on passive ordinary dividend income from line 1a of form 1099-DIV. The TurboTax program assumes I must file form 1116 because the foreign taxes paid exceeded $600, which could be a limiting factor as I am married filing jointly. However, if you log into TurboTax.intuit.com and read Claiming the Foreign Tax Credit with Form 1116, you will discover when you scroll down to the heading Foreign Tax Credit Without Form 1116, that there are three conditions where you do not need to file Form 1116. The first of these, which is applicable to me, is “if all your foreign taxed income was 1099 reported passive income, such as interest and dividends, you don’t need to file form 1116, provided that any dividends came from stock you owned for at least 16 days.” That is the situation with my $610.47 foreign taxes paid. Apparently the TurboTax program will not allow you to take the full $610 credit on passive foreign income because it thinks you are subject to the second condition, which says that you must file form 1116 if you paid more than $600, but by implication must conclude that some or all of the income was not passive income. This becomes apparent because the program prompts you to tell the program what entity or country paid the. foreign dividend on which the foreign taxes were paid. In my case, using form 1116, TurboTax only allowed me a $309 foreign tax credit, instead of the $610 credit I should be entitled to without having to file form1116. They applied the excess $301 as a carryover to my 2025 taxes.
I believe this is a program oversight that needs to be addressed by TurboTax. If anyone can explain to me where my thinking is incorrect, I would appreciate hearing from them in this forum. Also, if I am correct in my analysis, does someone know how to report this oversight to TurboTax?
Thank you.
