I am working on the TurboTax Deluxe 2023 product for Mac. This year I am entitled to a Foreign Tax Credit. Using the Easy Step method, the software correctly figures out that I have to fill out Form 1116, and it begins to collect information about. It even announces that it needs the tax paid at the foreign jurisdiction. But it never asks for the actual tax paid abroad.
The only way I find to enter the tax paid abroad is to switch to Forms and do it "by hand".
Is all of this a bug, a feature, or am I doing something wrong?
No, it is not a bug. TurboTax Deluxe is very limited in its handling of the foreign tax credit. Although the forms are included, for those who want to enter things manually, in order to have the guided interview that goes the entire way through you will need to upgrade to TurboTax Premiere which you should be prompted to do as you walk through the questions.
I understand that Foreign Tax Credits are an obscure aspect of tax returns that affect only a tiny minority of taxpayers, and therefore it seems fair to me that the handling this feature is limited to a premium version of the software.
But it is very confusing when my Deluxe version starts the interview, asks questions, and then suddenly drops the ball and moves to the subject without any warning and not having completed the task. I think this should be fixed. Instead of starting to process the Foreign Tax Credit, the Deluxe version should direct users to the Premiere version.
By the way, there is another thing that my Deluxe version does that may confuse taxpayers about their obligations. The program asks the user if he/she has foreign accounts worth more than $10,000, and when the answer is "Yes", it says "it sounds like your need to file" an FBAR with the FinCEN, which is correct. Then, after several additional questions, it asks the user if his/her financial assets exceed $100,000. If the answer is no, Turbo Tax replies "Based on what you told us, it turns out you don't need to report your foreign financial assets". This is highly misleading. What it means is that if your assets are for example $30,000, you have not reached the FATCA threshold of $100,000, which triggers the need to fill out Form 8938. But since you exceed $10,000, the FBAR report is still required. What the software should say is "Based on what you told us, it turns out you don't need to report your foreign financial assets to the IRS, but you may still need to file a FBAR report with the FinCEN if the combined value of your foreign accounts exceeds $10,000"
I agree it shouldn’t require upgrade. Since I have been using Turbo Tax for many years I know what needs to be done. But, for new user it may be nightmare.
This year TurboTax doesn’t seem to calculate foreign tax credit correctly. It seems like a bug. If I enter same amount as last year simulating similar income / credits it lowers FTC by few thousand dollars. That’s a huge mistake. Same tried at EFile.com works perfectly. I like to use TurboTax if this issue fixed. Can someone fix this please? I can only wait a little bit. Please help.