Have you included the foreign tax credit section in your return? If not, here are the steps.
- Go to federal> Deductions & Credits > Estimates and Other Taxes Paid > Foreign Taxes.
- Follow the screens until you see: "Do you want the deduction or the credit?"
- Select Take a Credit. (This is mandatory to generate Form 1116).
- Continue until you reach the screen: "Tell Us About Your Foreign Taxes."
- Click Continue.
- Eventually, you will see a screen asking: "Does your total taxes paid only include taxes reported on a Form 1099-INT or Form 1099-DIV?"
- Select Yes.
- The Critical Step: The next screen should show a list of your 1099s. Check the box next to your Vanguard 1099-DIV. This "pulls" the $3,500 from the income section into the credit section.
- On the "Foreign Tax Credit Summary" screen, click Add a Country (if one isn't already there).
- Choose RIC (Regulated Investment Company) from the dropdown list.
- Continue past the country summary.
- The software will ask about the "Simplified Limitation Election." * Select NO. If you select Yes, TurboTax will skip the carryover screens entirely because the simplified method doesn't allow for them.
- Continue clicking through the "other income" and "other expenses" screens (usually these are $0).
- You will finally land on the screen "Foreign Tax Credit Carryovers." Enter your carryovers from prior years here.
If you follow this path, you should see a tax credit and a carryover screen. If you don't see a credit, it means that the entire $3500 could not be utilized this year and is carried forward again.
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