Form 1116- Foreign Tax Credit - How to handle passive category income from multiple countries?

[GanaVK]

Details

I have interest income from 1 foreign country and dividends from 6 foreign countries, all of these are classified under the same category of passive income category when filing foreign tax credit form, Form 1116. How do I enter for each of these separately? Does going through the interview process handle the creation of different form for each country?

Also is there a way to select Form 1116 , delete the form and start over?

[MarilynG1]

If all your interest and dividends are reported on 1099-Int or 1099-Div, you can combine the totals for each under country 'RIC' (Regulated Investment Company) on one Form 1116.

If your interest/dividends are under a certain amount, you won't even need Form 1116 to claim the credit.

If you're using TurboTax Desktop, go to FORMS at the upper right and Open Form 1116.  When it is displayed, choose Delete at the bottom.

In TurboTax Online, in the left menu go to TAX TOOLS > TOOLS > DELETE A FORM

Here's more detailed info on Claiming the Foreign Tax Credit.

[pk]

@GanaVK ,  agreeing with my colleague @MarilynG1  for her answer, I would like to point out that if the interest income  from a foreign country is through direct investment  ( like you owning a foreign bank account ) and  not through a broker , the "RIC" or "various" u der source country column is not correct.  In such a case because there is NO 1099-INT or 1099-DIV  ( Foreign entities  cannot use  these forms to report income ) but the income was taxed at source, you have to  declare these as individual items/lines.   Also  you may come under  FBAR and FATCA  regs. depending on the underlying  investment amounts concerned.

I am assuming here that you are a US person ( citizen/ GreenCard /  Resident for Tax purposes).

Please also note  @MarilynG1 's comment about  using the  safe harbor process if your total  foreign taxes  paid is  =< $300  ( $600 if filing jointly ) -- this is advisable also for a different reason ---- Foreign tax credit allowable for the year is limited  by effectively a ratio of total foreign income to world income and almost never will allow 100% for the current year -- the unallowed portion can be  used  for one year earlier or multiple years forward ( but you have taxed  foreign income in those years ).

Does this make sense ?

[GanaVK]

Thanks @pk @MarilynG1 

Follow up just to clarify.

My Fidelity brokerage account has dividends from 3 countries and they have given mentioned the dividends and the foreign tax deducted in 3 different lines in the statement. In this case, is it acceptable if I combine them under the country various and report one line item with dividends/foreign tax deducted?

[pk]

@GanaVK  assuming that your broker on the 1099-div used only the total foreign taxes paid  ( Box 7) and  various for Box 8, then clearly IRS AUR program will check  the total foreign tax.  Generally that is what they do and then in the back up docs they detail the countries and amounts of foreign tax to each country..  Therefore  I see no issue in totaling the  three lines i.e.  country as Various and amount as sum-total of all the foreign taxes paid.  Note if you choose NOT to take the  safe harbor ( ref'd in my earlier response) or your total foreign tax is above the  safe harbor threshold  you have to decide which is more beneficial ( safe harbor or form 1116 with its limitations).  Also for form 1116 you will have to enter the total Foreign income/ dividends from these three foreign sources ----- form 1116 does allow you to break down of the countries.

Is there more I can do for you ?

Namaste ji

pk

[wizdude]

i have multiple 1099's with foreign dividends on each.  in every case, the 1099 lists dividends for individual countries as well as showing RIC dividends.  given this, does using RIC for all foreign dividends still apply? 

[DaveF1006]

Yes, it still applies.