foreign tax credit

[ndhoward1]

I'm stuck on reporting foreign taxes paid using turbo tax. It has specific instructions on how to report the foreign income shown on 1099-DIV from the largest taxed source first.  I have foreign taxes reported on 3 different 1099-DIV accounts.  When I go thru the next step to enter the taxes paid to France first, all 3 accounts show up and it asked me to check the box for the accounts that have taxes paid to France. Then it allows me to enter the amount of taxes paid to France in each of the two accounts that I've check off.  Then I hit "done" to get back to where I can enter another country to report taxes paid to.  TurboTax prompts me that I have more foreign income reported from my 1099's and do I want to report more foreign income. I enter Canada and click on "report income" and now only one account shows up as an option to click on, but my taxed income from Canada isn't in that account.  I'm stuck.  I've deleted all of the 1099-DIV info and re-entered it, and the same thing happened.

[rogge1722]

You will be using one form 1116. Column A will be used for Canada and Column B for France.

On a spreadsheet, in Column A in cell A1 insert the total Foreign Ordinary Dividends from Canada from all 1099’s. In cell A2 insert the total Foreign Qualified dividends from all 1099’s. In cell A3, insert the total foreign tax paid from all 1099’s. In Column B, do the same for France.

Of the 3 1099’s, you will need 2 of them. It doesn’t matter which one you choose. The 1st 1099 will be dedicated to Canada. In box 7, insert the total foreign tax paid to Canada from the spreadsheet. The 2nd 1099 will be dedicated to France. In box 7, insert the total foreign tax paid to France. Be sure to delete any amount in box 7 of the 3rd 1099.

To ensure a clean start, delete form 1116. When you enter the foreign tax credit interview, TT “sees” the foreign tax paid on the 2 1099’s. Select the Canadian one first and a screen will ask for the total Ordinary Dividends from Canada. Insert the total from the spreadsheet. TT will then loop back and select the remaining 1099 and ask for the total Ordinary Dividends from France. Insert that total from the spreadsheet.

Then continue on for the rest of the interview.

[ndhoward1]

Thanks, Rogge.  So I have foreign tax paid to 7 different countries, 1 RIC, and 1 hodge-podge of ETFs.  Do I simply create a 1099 for each of these in the manner you described?

[rogge1722]

Because there are more countries than 1099’s, there are some changes in the technique as TT can support only one country per 1099.  Complete the spreadsheet for all countries.  The following is for 3 countries but can be extended for additional countries.

This is an example of the preparation to fill out a form 1116 for taxes paid by 3 countries within a 1099-DIV.

They are:

 a: RIC which includes all mutual funds/ETF”s

b: Canada

c: United Kingdom

Three fictitious 1099-DIV’s will be created.  The original 1099-DIV will be used for domestic income only.

Bring up a new blank 1099-DIV.  For convenience name the payer the same as the country it represents. In this case the payer is RIC.  From the broker’s supplemental info, insert into box 1a the ordinary dividends from any and all mutual funds/ETF’s.  In box 1b, insert all qualified dividends form all mutual funds/ETF’s.  In box 7, insert the foreign tax paid from all mutual funds/ETF’s.  That completes the 1st fictitious 1099-DIV.

Bring up a 2nd blank 1099-DIV.  Name the payer Canada.  In box 1a, insert all the ordinary dividends from Canada; in box 1b all the qualified dividends from Canada and in box 7 the tax paid to Canada. That completes the 2nd fictitious 1099-DIV.

Bring up a 3rd blank 1099-DIV.  Name the payer U.K. In box 1a, insert all the ordinary dividends from the U.K.; in box 1b all the qualified dividends from the U.K.  The U.K. does not withhold taxes, but TT must see an amount in box 7 during the interview.  Insert $1.00 into box 7 and subtract $1.00 from box 7 of either of the previous fictitious 1099’s.  That completes the 3rd fictitious 1099-DIV.

On the original 1099-DIV, subtract all the foreign amounts from box 1a so that only the domestic ordinary dividends remain. Subtract all foreign amounts from box 1b so that only the domestic qualified dividends remain. Delete the amount in box 7, the foreign tax paid.  This applies to all actual 1099’s.

If there are more than 3 countries, TT will automatically generate additional F1116 copies as necessary

If there are more than 6 countries, the screen with the header “Report foreign tax paid to XXX” will only display up to 6 payers. Additional payers are on the following screen..