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Because they both fall into the Passive Category, TurboTax tries to link them, which reduces your credit limit.   You can try this in the Interview mode: Navigate back to the Foreign Tax Credit section. Proceed past the income entries to the screen titled Lessor Common Exemptions or Foreign History. Look for a screen titled Directly Related Expenses or Deductions Allocated to Foreign Income. There should be a field here to manually adjust or override the amount of interest expense allocated to the foreign source. By manually entering $0 for interest related to the rental, you should be able to move that expense into the 'not definitely related' bucket, which preserves your credit limit. For the Basis error in Smart Check, entering 1 is a common workaround to satisfy the software's ratio calculation without changing your tax outcome. If that doesn't work, go to Forms mode and try this: Open the Foreign Tax Credit Compilation Worksheet. Find the section for Interest Expense or Apportionment. Look for the line that pulls from Form 4952 (Investment Interest). You can right-click and select Override on this worksheet to set it to $0. This will flow forward and fix the math on Form 1116.

Do you see the Skip Import button now?   I have never imported a 1099-DIV, but have entered plenty of them manually.   Make sure your software is updated - You should definitely see the Skip Import button on the Partner import page.      Where do I enter my 1099-DIV in TurboTax?   Since you are using the desktop software, you can click on Forms and add the 1099-DIV from there.   

@CatinaT1    Hi Catina, Thank you so much! That is an incredible relief. Trying to figure out the exact daily APY for those middle-of-the-month gaps was driving me crazy, so knowing the IRS accepts the last official statement as a "reasonable method" takes a huge weight off my shoulders.   So, just to be absolutely crystal clear and put this to bed: I am good to go ahead and submit a second "Excess Contribution Correction" form to Optum for exactly $1.25 right now? Once they process that $1.25, I am fully compliant, the excess is 100% resolved, and I can just go ahead and file my 2025 tax return with peace of mind?   Thank you again for making this easy to understand!

You may wish to talk directly with TurboTax Support to determine if an amended return was filed. See: What is the TurboTax phone number? Customer support is available from 5 a.m. to 9 p.m. Pacific time daily.

My form I filled out from TurboTax had the correct I7Q6 when I pulled it from the TT site. But as requested in the letter I received from the IRS, I submitted a PDF on the IRS secure site and went ahead and included my receipt and certificate and my return was accepted quickly and I received my refund no longer than two weeks later.  

Software for tax years 2020 and earlier is no longer supported by TurboTax (as of 2023). You may be able to find another software program or a local tax professional to prepare an amended return. Note that you have three years from the date you filed your return or two years after you paid the tax due (whichever is later) to file an amendment. Some exceptions apply, like bad debt, worthless securities, foreign tax credit, or an IRS audit.   If you choose to purchase software from a vendor other than TurboTax, we caution you to use due diligence to ensure it is a legitimate vendor.

Did you itemize your deductions in 2023 and 2024? If not, your state tax refunds are not taxable income for federal purposes.   If you used TurboTax to prepare your 2024 return, your 2024 federal and state tax payment and refund information transfers to 2025, and, in most situations, the program automatically computes the taxable refund amount. In this case, you would not make any additional entries for the 2024 payment or refund. The software handles this whether you itemized or not.   If you itemized your deductions in 2023, you would need to manually calculate the taxable amount of the refund to enter on the State and Local Income Tax Refund Worksheet Part VII. You may wish to see IRS Publication 525, Taxable and Nontaxable Income, for information about how to recalculate a prior year's tax and for related examples. Or you can choose to omit this step by claiming all of the refund as taxable. Again, if you didn't itemize, the refund isn't taxable.   For tax year 2025, if deductions are itemized on Schedule A, the prior year state tax payments will be included, as state and local taxes that were paid in 2025. However, if the refunds you received are not taxable, you may wish to omit these payments from your 2025 return since you received the benefit of the deductions on the returns filed for each year.

Rick - the "cumulative adjustment to basis" is on the separate schedule (sales schedule) mailed with all the K1 forms I received.  That schedule also includes other values such as:  gain subject to recapture as ordinary income, AMT gain/loss, adjustments for bonus depreciation, etc.    I was also able to determine that on all the K1 sales schedules that this "cumulative adjustment to basis" number is equal to the "current year net income/loss" number in the Capital account section of the K1 MINUS the value in Box 19A of the K1.   So I guess my last remaining question is if I should adjust my basis by this number.  

Hello, I am the OP for this thread and here is my update on this issue. I called the IRS and explained that I had received the CP12 notice and another notice saying that I had calculated or transferred the info on form 5695 incorrectly. I resubmitted the form twice and they still said I did it wrong. This is after I got the same numbers running my taxes through both TurboTax and FreeTaxUSA.  I called the IRS and told them this, plus that it is a known issue with IRS that the QMIN codes beginning with letter I and letter O are not working. The IRS lady said she didn't know what I was talking about and told me to file an amended return. On my amended return there is a space to write what changes were made and I used that opportunity to explain the QMIN code issue and wrote in lower case what the code is i7q6. I got a response from IRS that they are investigating and need 60 days and I don't need to do anything further until hearing from them again.

No.  If you read the form it clearly says, enter the amount on line 9A from form 2441.  The PA law is basically giving you the same credit as you get for the federal credit, with no calculations whatsoever.  The instructions have NO instructions other than enter the amount from 9A on form 2441.   So whatever you get for federal is what you will get for state.    The amount that is on line 9A of form 2441 will go on line 2 of Schedule DC which will go on line 23 of the PA-40.  There is nothing more to it.  If something affects your federal credit, it will also affect the state credit. 

1- If I missed Form 8833 for tax season 2025, should I wait to see whether the IRS accepts the return as filed with treaty benefits, or should I amend now with Form 1040-X and attach Form 8833? If you want to be 100% compliant and avoid the potential $1,000 penalty for non-disclosure, you should file Form 1040-X. You don't necessarily have to change any numbers; you are simply "amending" to attach the missing Form 8833. 2- If the IRS does not accept the treaty position, would the normal next step be? To respond to a notice or amend the return? If you don't amend and the IRS doesn't accept the treaty position, you will likely receive a Notice CP2000 or a Letter 12C. This letter will state that they have adjusted your tax because the treaty benefit was not properly documented or allowed. You would then respond to that notice by sending a signed copy of Form 8833 along with a cover letter explaining your eligibility under Article 20 and the Saving Clause exception. 3- Do I need to file Form 8843 for 2023, since I was in the US from late December, 2023 to early January 1, 2024? Yes. Even if you were only in the U.S. for three days in late December 2023, you were a J-1 Research Scholar and an exempt individual for those days. Every J-1 non-resident must file Form 8843 annually to document their exempt status, even if they have $0 income. Filing this form for 2023 officially makes that year your first exempt year. This is important because it proves why you remained a non-resident in 2024 and why you finally transitioned to a Resident Alien in 2025. You can mail a standalone 2023 Form 8843 to the IRS (Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215) right now. It is technically late, but the IRS generally accepts late-filed 8843s without penalty if there was no tax due.

I received a letter from the IRS stating that "one or more of the Qualified Manufacturer Identification Numbers, QMIN) is missing or incomplete" I did efile on turbo tax and my PDF does say I7Q6.   Are we in agreement that it is the CORRECT code OR do i need to resubmit it with the L7Q6 ?   I am just so confused and frustrated.

Yes, you should file form 8833. While Publication 519 mentions an exception for scholarships, you are also claiming a treaty benefit for personal services (your W-2 wages from Univ Y). As a Resident Alien, you are technically overriding the "Saving Clause" of the treaty. Filing Form 8833 is the "safe" way to disclose this. It prevents the IRS from wondering why a Resident Alien (who is usually taxed on worldwide income) has $0 taxable income. There is no penalty for filing it "just in case," but there is a $1,000 penalty for failing to file a required treaty disclosure. California does not recognize federal tax treaties. Even if your Univ Y income is 100% exempt from Federal tax, it is 100% taxable by California because you earned it while a California resident/from a California source. On Schedule CA (540NR), you will have to "add back" the treaty-exempt income in Column C (Additions) so that it is included in your California taxable income. Massachusetts generally recognizes tax treaties. Since you were a MA resident for 10 months and Univ X is a MA source, the income is exempt from MA tax if it is excluded from your Federal Adjusted Gross Income. You will use Schedule Y on your Form 1-NR/PY to subtract the treaty-exempt income that you received while in Massachusetts.