How do I generate four copies of Form 1116 to enter foreign income from 11 countries spread over five 1099-DIVs?

[cabesally1]

I have income from 11 countries spread over five 1099-DIVs. The interview format does not work because after entering Country A income, from three 1099-DIVs, those 1099s disappear from the list of 1099s, but I need those 1099s to be listed to enter Country B data, and so on for 11 countries. So I worked directly on Form 1116, but each form can handle only three countries. So I need to generate additional F116s to enter the income and taxes paid for the remaining eight countries. How can I do this? Or is there a workaround for the interview issue to keep all five 1099s in the source list?

[rogge1722 · Accepted solution]

A significant shortcoming of TT is that if you have to fill out Form 1116, it can support only one country per Payer.  In the past, if there were more countries than Payers, using “Various” was the technique used to restore the 1 to 1 country/payer ratio. The following technique restores this 1 to 1 ratio by creating additional payers to equal the number of countries.

This addresses the issue of a 1099-DIV with Box 7 showing foreign tax paid to multiple foreign countries and it is necessary to identify and list the countries individually on Form 1116. This is done by utilizing Dummy 1099-DIV's as illustrated by the following example.

We have a 1099-DIV with Box 7 displaying the total tax paid to 3 foreign countries we will call “A”, “B”, and “C”.

Navigate to the “Here’s the dividend info we have so far” screen displaying the name of the Payer. This will be our Main Screen.  Bring the Payer up in EDIT mode.  Change Box 7 to the amount paid to  “A”.  Click “Continue “.  Either the Main Screen will appear or 2 consecutive screens asking for dividends paid and the source country.  If the latter occurs, insert the data for  “A”, then continue to the Main Screen.

Click on the New Payer button.  We will name this Payer “Dummy1”.  In Box 1a, put a zero.  This prevents TT from issuing an error. In Box 7, enter the tax paid to “B”.  Leave the remaining boxes blank. Click “Continue” back to the Main Screen.

Again open up a New Payer.  We will name this “Dummy2”.  Put a zero In Box 1a and in Box 7 the tax paid to “C”.  Click  “Continue” back to the Main Screen.

Now when we go to the Foreign Tax Credit Interview Section, we are positioned to enter all the necessary data for each country individually.

Now we consider countries “D”, “E”, “F” etc.  
When multiple copies of form 1116 are needed, they have to be created in the right order.
Using TT’s special instructions as a guideline, the following strategy is suggested. Assign to “A” the largest tax paid, then to “B” the 2nd largest and so on through to “F”.  Then when we enter the Foreign Tax Credit Interview Section, we run them through in the same order; greatest to the least.

You may find on part 2 of Form 1116, it is necessary to type in the date for the fictitious Payers which will be the same as the actual Payer, usually 12/31/2018..
Due to recent changes, false errors may appear on the f1116 wks. in part 1, lines 1h, 1i, and 1j. Override them with zeroes to clear the error.

In your case, you could use the 5 actual payers; each one dedicated to one country only and create 6 fictitious payers for the remaining 6 countries.

[cabesally1]

I see that this can provide a way to enter the foreign tax credit, but not the foreign source dividend. It seems to me that each dummy Payer has to reflect the foreign dividend income, not just the foreign tax paid. This is because Form 1116 Part I requires dividend income by country. But in order to prevent double-counting of dividends, the Country B and C dividends have to be backed out of the Country A Payer. What am I missing?

[rogge1722]

For foreign source income on a 1099-div, during the FTC interview, a screen will prompt for the foreign source income. You type in the income for the country that the 1099-div represents. TT will then put that amount into the 1099-div box 7 and then copy it to the f1116 wks. Part 1 line 1c. TT does not use the data in box 1a or box 1b.

[carlos3]

Sorry, rogge1722, but you don't have it quite right. On page 23 of the IRS's Form 1116 instructions it says, "Complete Part IV on only one Form 1116 (the one with the largest amount entered on line 24) to summarize the credits you figured on all of your Forms 1116." TT completes Part IV on COPY 1 of Form 1116, which means that the forms need to be ordered with the largest CREDIT, not (as you said) "the largest tax paid." I just had my 2020 tax returns rejected by the IRS when I attempted to submit them electronically. In my case, I paid less Dutch taxes on my passive than on my re-sourced income, but the credit for my passive category income was larger due to a carryover from 2019.