If you have already created a f1116 with the dividend, delete it and the f1116 comp. wks. This is because in order to e-file, the category of income with the largest tax paid must be first. In your case, general category is 1st for earned income and passive category is 2nd for investment income. Since TT sees foreign tax paid in the 1099 box 7, it wants to default to the passive category first, so here is the technique to bypass the passive category and go to the general category for the 1st f1116.
This shows the header and response for each screen in order that the 1st (COPY 1) F1116 will be “general category income” instead of the default “passive category income” which is the result of the initial screens focusing on dividends.
To ensure a clean start, delete any F1116’s before entering the foreign tax credit interview. .
1. Foreign Tax Credit.
Continue
2. Tell us about your foreign taxes.
This screen may or may not appear for various reasons.
If displayed, click on Continue.
3. Foreign Taxes
Continue
4. Do you want deduction or credit?
Credit
5. Reporting foreign taxes paid
Continue.
6. Where did you receive dividend income?
Not used at this time, so just select the first one then Continue
7. Income from foreign countries
Done
8. Need to report income
No
9. Simplified limitation election for AMT
This screen may or may not appear for various reasons.
If displayed, will assume YES is selected
10. No other income or expenses
No
11. Completing forms 1116
Continue
12. Foreign tax credit worksheet
Continue
13. Choose the income type
General category then Continue
For screens 14 through 32, insert the applicable data.
Insert income on the screen that asks for it even though reported elsewhere.
33. Foreign tax credit summary.
You should see COPY 1 general category income
Select Done.
34. Reporting foreign income expenses.
Yes
35. Foreign taxes
Continue
TT will exit the interview. Now re-enter the interview and work through the screens for the dividends to generate COPY 2, passive category F1116.
