I had $266 of foreign tax, as reported on form 1099-DIV, but TT is only allowing a $16 credit. The usual screen that asks about the related foreign income didn't pop up, so I went to the 1099-DIV form in the "View" window and manually filled in the info, based on the same form in the 2019 TT View window. That made the missing window pop up in the interview questions, but TT is still only allowing a $16 credit. I've never had this problem before. The foreign dividends paid were more than the tax, so that should not be a limiting factor. The composite form 1099 that I downloaded from my broker had some information missing on the Form 1099-B (sales) portion of it... could this be causing the problem, even though the 1099-Div portion was complete? (The missing info won't be available until mid-March.)
In form 1040, see line 16, the amount of tax. The amount of credit allowed on line 20 cannot reduce the tax below zero.
I'm having almost the exact same problem with this section. I've yet to get a clear answer on how to enter my information or why the credit is limited. Very frustrating.
The foreign tax credit is a non-refundable credit meaning that it reduces tax liability based from taxable income. Chances are that $16 foreign credit reduced your tax liability to zero and will carryover the unused tax credit.
You can carry back for one year and then carry forward for 10 years the unused foreign tax. This means you can amend your prior year's return and apply the unused portion of your carryover or elect to carryforward your unused for the next ten years.
I agree with you, I had problems last year and this year entering this information. I only had foreign taxes on a couple of stocks and mutual funds that should have been simply to enter and report. However it was anything but and the online help seemed to know less about the problem than I did. This year my problem boiled down to "the date the taxes were paid", originally I had entered various, finally I just entered the last day of the year. My return was rejected twice by the IRS before I made this change. Turbo tax had approved them for filing and were even less help when it came to figuring out how to fix the problem after they were rejected. I hate to think what someone with a complicated foreign tax situation must go through with this section. Next year I will be looking at different software or break down and find an accountant. Good luck!
To avoid making expatriates, military personnel stationed abroad and international mutual fund investors pay taxes to two countries, the Internal Revenue Service gives them a choice: They can deduct their foreign taxes on Schedule A, like other common deductions, or they can use Form 1116 for a tax credit and subtract the taxes they paid to another country from whatever they owe the IRS. Both the credit and the deduction are entered in the same place. Here's what you do:
In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through this section. If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit if your situation requires it.
Dawn, I understand the frustration of the people trying to manage through the foreign tax credit maze. I am also having issues using the software.
The TT software instructions for foreign tax credit is just not working. I have no tax liability for 2020 and so I want to carry the credit over to future years. In the income interview section for 1099-DIV, I entered the foreign taxes paid in Box 7.
In the summary page of the deductions and credits next to Foreign Taxes it has $0. I clicked UPDATE. The first page confirms that the software registers that foreign taxes were paid and entered on a 1099-DIV. On the next page I verified I no other foreign taxes to report, ready for a calculation. This was followed by a page stating the software has verified I met all the requirements for a credit without filling out Form 1116, "but we see no foreign taxes being made." How did the first page confirm foreign taxes were made and the third page says they are not there. It instructs one to return to the income section and fill in the proper box in the 1099-DIV page with the foreign tax value. (Did that and the value is still in Box 7) The last paragraph then suggests, "Select Search Topics or Forms in the toolbar at the top of the screen." It continues with next step instruction, but there is no such option listed at the top of the page. Upon hitting the CONTINUE button it took me to a asking if I want a credit or a deduction. Clicking CREDIT put me back into the Deductions & Credits summary page.
Any suggestions on how to handle this using TT Home and Business 2020 version?
I am using the TT Premier Desktop and it automatically put the Foreign Tax Paid of $80 into my itemized deductions of Other Taxes. TT did not check which was better, credit or deduction, nor was I asked to select. How do I fix this because I believe it should be a credit as it was last year. This seems to be a glitch in TT.
I am using the TT Premier Desktop and it automatically put the Foreign Tax Paid of $80 into my itemized deductions of Other Taxes. TT did not check which was better, credit or deduction, nor was I asked to select. I did enter the foreign dividend amount of $755 when asked. How do I fix this because I believe it should be a tax credit as it was last year for me. This seems to be a glitch in TT.
TT 202 for foreign dividends and tax credits has been totally useless. I have spent hours on the phone with TTax experts who have not been able to solve the problem. One even asked the software development team to look into the problem. The answer I got from that team was basically "tough, that's the way it is. deal with it." Well, I can't deal with it because TTax won't let me complete the entries so I can't file. I'm wondering if anyone from Intuit reads these posts. TTax has a BIG problem which is now my problem. And TTax is not helping.
The TTax foreign tax interview section is totally broken. But TTax won't admit that and won't fix it.
Jim, I fixed my problem by deleting what I had imported from my financial institution and then reimporting. It seems so far that has fixed the problem and put the credit in and it is no longer recognized as an itemized tax deduction. I don't believe that section of TT can handle numbers being changed. Wished someone had told me to just delete the imported section. I hope this helps you.
What do you mean "From within your return,"? What do I do to get in my return?
The search box just give me 500 results to "foreign tax credit."
There is no Jump To option.
Bilco,
Hopefully this isn't too late, but I was having a somewhat similiar problem. The issue was that when TT imported the dividend data from Vanguard, it missed the income from the foreign entity that generated the foreign taxes. To check if this is the issue for you, go to the Forms section, and go down to the FORM 1099-DIV Worksheet. Look down at the Box 7 entry and it should show the foreign tax paid (Say $200). Then look at line "d". It should show the dividend income that generated the tax, (something like $3000). If the figure is not there, go back to Vanguard (or your broker), get the number and enter it.
In 2019, it was automatically enetered in the transfer process, for 2020 it was missed. Either a TT problem or a Vanguard problem.
Fo me, when I found the error, I had to file an amended return.
Two things: On the multiple entries, just make one entry, enter the country as "Various", and consolidate it. It works for me.
On a second matter, the tax credit calculation:
Hopefully this isn't too late, but I was having a somewhat similiar problem. The issue was that when TT imported the dividend data from Vanguard, it missed the income from the foreign entity that generated the foreign taxes. To check if this is the issue for you, go to the Forms section, and go down to the FORM 1099-DIV Worksheet. Look down at the Box 7 entry and it should show the foreign tax paid (Say $200). Then look at line "d". It should show the dividend income that generated the tax, (something like $3000). If the figure is not there, go back to Vanguard (or your broker), get the number and enter it.
In 2019, it was automatically enetered in the transfer process, for 2020 it was missed. Either a TT problem or a Vanguard problem.
Fo me, when I found the error, I had to file an amended return.
I just went through the annual horror story. What works for multiple countries is to report it all as a single country. Just make sure your country of choice has a high enough withholding to make it work. Canada is a good choice. If the IRS wants detail they will ask and my explanation will be that that it is impossible to file on line without forcing the filing into the software. Another nuance that showed up this year was the requirement for adding our tax basis for all stock and then for only that portion that produces foreign dividends. I don't recall this from prior years. In short, Congress has created a mess and Turbo Tax has not made it very easy to navigate the mess. It took me several hours to get through this, but it was worth it.
Thanks to all the people who replied to my message. I followed the advice of a previous poster who suggested deleting the 1099-DIV and reimputting it. Then I went back to "Easy"Steps, and got shunted along to the instruction where you can select between Sched A (forgot the actual term) and Foreign Tax Credit. My feeble brain can't remember the next choice, but I chose the right one this time and all my problems went away. My $374 credit showed up on the summary page.
What I learned from last year is that unless you have actual foreign income—other than from an ADR in your brokerage account—or a foreign trust, do not fill out form 1116. If you're on the right path, the EasyStep instructions will have you list your foreign income sources and then ask you to enter an income amount (your ADR dividends). I actually just entered the amount for Denmark and the program went happily on without asking me for the Netherlands amount. Who am I to tilt at windmills? The credit showed up in the right place, and now it's on to state taxes! Personally, I think it's worth it to pay $700 for a CPA! Good luck to you all.
I'm sorry you had such a hassle! I didn't have to do the second part (entering basis). I imported my 1099s from Fidelity, so perhaps that all got entered into the tax forms without my knowledge.
Regarding multiple sources of foreign income, I listed the two countries as requested by EasySteps, but when I entered the ADR dividends for Denmark, I wasn't asked for the second country's amount. The steps proceeded blithely along to the end of the section, resulting in the correct foreign tax credit in the right lines of the right forms, Sched 3, etc. Go figure!
Those of you who had foreign source income from 2 or 3 countries are not experiencing the problem faced by folks who have foreign source income from multiple accounts and more than 3 countries. The Form 1116 only handles 3 countries and the Turbo Tax program seems to assume that all of your foreign source income comes through a single 1099 Div. If you have 4, 5 or 6 1099 Divs and they have foreign source income from multiple countries, you run into software issues. The solution is to consolidate all of the foreign source income with tax withholdings into a spread sheet and the enter the data as if it all came from a single country. It works.
Can you clarify this for me? I have 3 countries that I paid foreign tax to. All the countries are listed on my 1099 statement. Do I just enter VARIOUS like someone mentioned and the total for all 3? If I enter all 3 countries, it makes me select 1 and then enter the income amount but I can't go back to the other 2 as it thinks it is done. If I try to enter 1 at a time after the first income, it thinks it is done. Thanks.
This year, we are getting reports that tax returns with "Various" are coming back with e-file rejections. You can re-enter the income in three parts, or select the country that represents the majority of the income and tax, keeping your more detailed records on hand should you need to provide that information at a later time.
As long as the countries are not prohibited countries (Cuba, North Korea) it will not have a material affect on your tax return.
Thanks. Can you provide the steps to do this as I can't seem to figure out how to enter more than 1 country. I have tried entering all 3 in the drop down boxes and then when I go to the next step it wants me to select 1 country and then enter the amount on a step after that. But then it thinks it is done and won't let me go back to the other 2 countries. I have tried entering 1 country on the drop down and going thru the process, but still can't enter more countries later. I would prefer to enter all 3 countries and it seems I should be able to but can't. Thanks.
TurboTax only allows you to select one country per payer, unfortunately. You might want to sum up the number and put it under one country. Here is the discussion, click here: Multiple countries
Go back and re-enter all of your 1099 DIVs with foreign tax withholding and when the dialogue asks which country just chose a single country. Germany, France, Switzerland and Canada have the highest withholding tax rates, so one of them is likely a good choice. Do NOT enter "various". Then just go through the dialogue. Separately, add up all taxes and all dividends from which taxes withheld and all foreign dividends from which no taxes were withheld. When you go into the credit section you will need the tax withholding information to see if it comes out right.
When you do the foreign tax credit process ( in Deductions and Dividends listed under the subheading Estimates and Other Taxes and then scroll down to "foreign taxes". Run through that dialogue by chosing to take the credit and it should all be automatic if you entered the 1099 DIV as above. Go through the dialogue BUT DO NOT try to review your 1099 DIV entries in the credit dialogue section entries or you will have to start all over again. Just go through the dialogue and then finish up and the credit should then appear in the main list of Deductions and Credits under the subheading Estimates and Other Taxes paid select "foreign taxes" from the list and there you should find a total that will approximate your spread sheet total. When you do the review there be a half dozen more question that come up, such as your total foreign income
( computed on the spread sheet above ), your tax basis for all foreign income producing assets and your tax basis for all income producing assets.
This section of the Code is a nightmare, but if you have a large credit it is worth a hell of lot more than the deduction so it is worth the effort.