foreign tax credit

[rogge1722]

I am not familiar with all the ramifications regarding the FEIE section. I suggest posting it and someone with more expertise in this area will respond.

[Matilda]

I thought I understood this but I am having issues:

1.  My Merrill 1099 DIV has income from United States and 7 foreign countries.  Australia has no tax, and  6 other countries have foreign Tax.  In following the instructions, I changed the entries on the original 1099DIV to include the income from USA, Australia, and Germany.   Germany Foreign Tax in Box 7.  In the interview for foreign tax it asks about foreign income.  Australia is foreign but no foreign tax - do I need a separate 1099 DIV? and Germany has Foreign income and tax - should it be a separate 1099 DIV?  Germany foreign income is included in the total.  So My top level 1099 DIV has only one foreign source foreign tax (Germany), but lots more income that was not foreign taxed (income includes all USA, Australia, Germany). 

following this I have separate dummy 1099 DIV with the country income and tax - each dummy 1099 DIV is specific to the country - both income and tax.

2.  I can't get to all my 1099 DIV in the interview section for Foreign Tax. 

Thank You

[potentilla]

if the 1099-DIV with Box 7 is from a brokerage with both domestic and foreign dividends,  according to this method, do i leave in Box 7 total of US company dividends plus the largest foreign country dividend? Or, do i make the foreign company a 'Dummy A' and follow the instructions? I did the former, and upon the error report my qualified dividends are then, of course, larger than what was left in box 7. How to resolve this? Remove some of the qualified divs to correlate with the foreign earnings? or, move the country A to is own 'dummy' form?

[potentilla]

Or, do i correct the 1099 div  with the original value for total ordinary dividends (which includes the foreign  divs)?

[potentilla]

it actually wasn't the screen in my question. I get it now, it refers to the 'dividends on 1099-DIV' in the 'interest and dividends' section of the 'your 2019 Income summary' in the downloaded TT version. Not getting alot of help from "experts"

[potentilla]

or, are we meant to put all foreign dividends on "dummy entries" , then finish the interview to create the form 116. Then, do we go back into income and delete the 'dummy' income entries?

[Matilda]

I am checking back to see if my question has been answered and see I am not alone in my question.  I think I am going to leave the dividends that have no foreign tax at all in the Top 1099 DIV - for me that is USA and Australia, then start making dummies for dividends that have foreign tax.  So I will add another dummy for Germany.

I still am not seeing all my 1099DIV in the interview.   2018 TT went to another page for additional 1099DIV - 2019 does not seem to do that.  I cant get to my dummy 1099DIVs.

[potentilla]

I finally had the time to call Turbotax support and spoke to very helpful Leola about foreign tax credits entering. This clarified for me the questions i had above. To recap the procedure: 1. Create the new 'dummy' entries ( on the interview: 'personal' -> 'personal income'  -->'interests and dividends' --->'dividends on 1099-DIV'. Then, in the new "Lets get the details from your 1099-DIV or brokerage statement" in the 'received from' can be the 'dummy' name and country ). In Box 1a enter the dividends from that country. And, one can put the qualified dividends from that country in box 1b , or these can be added later in the 'deductions and credits' interview when one fills out the interview (Estimates and other taxes paid -->Foreign taxes ). Enter the foreign tax paid into the box 7. TT combines dummy entries from the same foreign country when it creates the Form 116, which accounts for a smaller number of Form 116 entries then dummy entries if more than one dummy entry per country (example from two brokerage statements). Of note:  subtract the dividends (both total and qualified) that one is entering into the the foreign country 'dummy' entry from the main brokerage 1099DIV. (Also remove the box 7 foreign tax from the main brokerage 1099DIV when it is entered in the 'dummy'). The total dividend income from all the 'dummy' entries has to equal the total dividend income in the brokerage 1099DIV.  When TT files, it sends in the total dividend income which has to equal what IRS gets from brokerage company 1099s submitted.

When one does the foreign tax interview in the 'estimates and other tax paid' section of the 'deduction and credit' category, go through each of the subcategories (i don't want to open it back up to find out the name since it will make me go through everything again). This is also where you add total cost basis of foreign dividend earning and total cost basis of all dividend income! Go through each one to avoid getting error messages later in the review.

I am using  the downloaded home and business version of TT.

[GaryDarien]

ridiculous you had to go through all this.  

Where is the TT team lead for this area? 

They owe us all an apology and a promise to fix this - not next year, but this year - many haven't filed yet.  

[shung89]

@potentilla Hi Potentilla, Thanks for going through the trouble of explaining the solution but I"m still not following. If I have 2 items earned wages that is over of the FEIE. where do I put it so it can be calculated for the foreign tax credit and the second item is interest savings, how should i put it in TT to apply FTC. I would be really be appreciative if you or someone else would just explain this plainly to get around this TT quirks.

[nikesyrena]

I complain about this defect every year.   Even if you combine 8  countries and pretend that they are only 4, for example, you have to be aware that you can only use each country 1 time.  When I got all done with this for 2019 I was still not sure it was right because I only got to use about 4500 of the roughly 6500 possible credit, which seemed to have been a function of some incomprehensible alternative minimum tax adjustment that is made just to the foreign tax credit.  Then I read the instructions for form 1116 which are as incomprehensible as the TT program dilemma and I decided that my time was worth more than fooling around with it anymore or trying to understand the calculation and the adjustments made in 1116.    Complain to TT about how it works and write your congressman  about asinine it is that this is as complicated as it is.  

What is even more interesting is that if you use the corporate version which does 1041s for Trusts, it is seamless and simple.  

[WaltCulver]

Folks - To me, there's NO PROBLEM here.  I've been using TurboTax for years and years, and I've have multiple foreign dividends with foreign taxes for years and years.

All I do is type in Various for the country and off I go, no problem whatsoever.

[nikesyrena]

That (various) does not work if you have dividends from multiple countries in the same year which withheld taxes.  

[WaltCulver]

Folks - My federal return handles the foreign tax credit fine, but it appears within line 18d on form 1040/1040 SR.  That's AFTER the tax is computed (and long after federal AGI , Form 1040 line 8b,  is computed).

My state, Virginia (and I presume most other states), begins its tax calculations with federal AGI and nowhere do I see that it goes down the 1040 to look for the foreign tax credit.   Nor does TurboTax seem to do it by picking it off Form 1116.

So, for years, have I been overpaying my Virginia taxes in the amount of the foreign tax credit because of this quirk? 

[WaltCulver]

nikesyrena

  Well, it has and just did in the tax returns I mailed.