Form 1116 error - how to include Foreign-sourced interest or dividend income when foreign taxes paid are 0

[valleybuy]

I need to include foreign sourced INT/DIV in gross total foreign income in 1116.

In the self created 1099-INT there is  foreign bank interest (passive income) but Foreign taxes paid is 0 and this Interest  income does not carry over to 1116 and ignored in total foreign source income calculation alongwith other 1099-DIV foreign dividend that are pulled in as (box 6) Foreign taxes paid are more than 0 in those.

when I add the to DIV in 1116,  TT gives error while filing as there is mismatch in foreign income in 1116 and form 1099DIV and 1099 INT

a- Do I fix form 1099-INT to say its foreign income?

b- or should I use new 1099-MISC and mark as foreign income

if its b then I'm not consistent as in past used 1099-INT having more than 0 Foreign tax paid but this year its 0

@DaveF1006 

[DaveF1006]

 To clarify, how much is the interest?

[valleybuy]

its $110 and mostly it gets refund when taxes are filed in foreign country , so I want to show FTC=0 for interest and FTC against the foreign dividends 

[DaveF1006]

Enter the 1099 INT but do not report a "0" in Box 6. Leave it blank so that the program doesn't think it's foreign interest. Even if it is, it should not be used in the calculation for the Foreign Tax Credit.

[valleybuy]

however, the idea is to report it as Foreign interest so its added to the pro- rata Foreign tax credit calculation and use available foreign tax credit.

Otherwise using 1099-MISC will make software think its US Interest

[DaveF1006]

To clear all mismatches, go to your 1099 iNT entry and type in "1" for your foreign tax credit. There will be a follow-up question that is labeled Tell about your Foreign Interest; Here you will type in $110 and the country where this originated.

When you start preparing your foreign tax credit section, both the 1099-INT and 1099-DIV will be linked. This saves the tedious task of entering these manually, as there will be boxes to check that are linked back to your 1099 INT/DIV entries. Both incomes will now be reported to get a true estimate of your foreign tax credit.

Adding the $1 won't make an impact on your return and will not arouse scrutiny with the IRS.  If you do feel anguished by reporting that extra dollar as a credit, you can edit your 1099 DIV entry and reduce the foreign tax paid in Box 7 by $1. This way, your foreign taxes paid are reported correctly.

[valleybuy]

Its strange that TT does not have this feature in interview mode.

I seem to have solved the problem, can you confirm if this is valid?

in the self created 1099-INT I entered Interest income in box 1. In box 6 entered Foreign Tax as 0 and opened the 1099-INT in Forms mode and checked 6b box selecting the  Form 1116 that should include this foreign interest income and entered the same interest Box 1 amount in box 6d.

This carried over both the 1099-DIV and 1099-INT in form 1116

Is this valid? seems the review states there are no errors?

@AmyC @DMarkM1 

[DaveF1006]

Yes, this is perfectly acceptable and necessary in your case. TurboTax’s automated interview process relies on an amount in Box 6 (Foreign Tax Paid). If you enter “0,” the software generally ignores that 1099-INT for Form 1116. By manually overriding this in the worksheet, you make sure the income is still treated as Foreign Source Income, which is important for calculating your Foreign Tax Credit accurately.