Multiple countries for Foriegn Tax Credit (Form 1116)

[ral44]

Form 1116 needs improvement. When the data for foreign taxes is added on the 1099 Div worksheet it asks for it to be linked to one column on Form 1116 - i.e one country. But I get tax withheld from multiple countries on one 1099 Div. Plus I have multiple accounts and the same country is on more than one 1099 Div. I constructed a spreadsheet to calculate the totals by country so it could be entered correctly in the 1116 worksheet. But the review flags an issue since I leave that linkage empty. It still seems to calculate correctly, hopefully it will e-file OK.

This should be further improved for next year to understand that there can be a many to many relationship between a country and the accounts that go into a single tax filing. It's only three items per entry: country, amount of income, and tax credit. The brokerages supply this as supplemental information on the 1099 - you ought to be able to import it.

If you have a simple suggestion to clear the warning, I'd like to hear it. Thanks.

[DaveF1006]

One suggestion I can offer is when it asks for a foreign country, pick various instead of recording each country individually. See if this works for you.

[sundevil71]

This appears to be a longstanding issue with TurboTax that remains unresolved. I found answers surrounding this topic that date back to 2019. Using TurboTax H&B so if not using appropriate package, please advise...

I, also, have multiple brokerage accounts (payers) which each show foreign income + taxes paid from multiple (more than three) countries in each. Never encountered an issue with this apparent glitch in previous years; however, this year TurboTax appears to be choking on a new requirement to list each country rather than compiling all of them into "Various"? When walking through the TT interview in the section about Foreign Tax Credit, I used dropdowns to select multiple countries from which to Report Income. A user must select a country to enter data (user may only select one country at a time). After entering the data for one country, TT prompts to Review Entries or click "Done". If selecting Done, TT moves on to next section and gives no opportunity to add data from 2nd country, 3rd country, and so on. If selecting Review Entries, TT appears to forget the list of multiple countries that I had entered before (except for the one just completed). If I add another country back to the list and Continue in order to enter its data, dollar entries from the first country that were entered are pre-populated in the fields for the second country. Editing those fields appears to also wipe out any data that was entered from the first country. Trying to repeat that process to enter a third country, I found that my entries from the first country were no longer shown at all. When accessing the Form 1116 and attempting to do this directly in the forms rather than via the TT interview, I'm able to enter up to three countries manually. This approach would be a pain but, at least, work for entering 3 countries or fewer. IRS instructions state to create multiple 1116s if a taxpayer needs to enter info for more than three countries, but TT does not seem to allow that. I was able to create another 1116 but it seems to be uneditable (clicking in columns in Part I to name countries, enter data, etc. doesn't work). Disappointed to find that this issue seems to have been present in TT for many years, with a growing number of people encountering it, and it still appears to be a problem that TT hasn't bothered to resolve, except for, possibly, a convoluted process for creating dummy 1099-DIVs and then manually entering everything which other users have reported as causing false errors during the review process.

[ral44]

Well it's nice to know I'm not the only one. 

I don't like making everything "various". The IRS wants it listed by country, I assume that is required by the tax law. The purpose of 1116 is to limit the deduction in proportion to the proportion of the country income compared to total income. So making everything "various" violates that, and I expect, the law. That's not something Intuit should be comfortable with.

Like you I did get things entered using the forms mode. But I didn't have to make any fake 1099-Divs. I added additional Form 1116s. You do this by choosing "open form" in the menu (F6 is the shortcut). Then choose the form you want (I used the search box in the screenshot below since the list is long) and click "open form". 

In the box that comes up (shown below) you can choose an existing form to edit or add a new one. When you add a new one you then have to use the "quickzoom" to the worksheet located near the top. The worksheet is where you can input data that will carry into the form. As you can see I have 3 forms in my return.

It should be easier. In retrospect I'm not even sure how I found this. (I should have bought a lottery ticket that day.) But the whole Foreign tax credit could be easier: the data it really needs input are the country, amount of income, and amount of tax paid. Then the program could add the amounts when the country is the same and do all the calculations and add the necessary forms. 

Before last year I used  a competing program and while I could get the data in using the forms mode (though it wasn't easy) it refused to e-file if there was more than one Form 1116. So it was a relief when I tried TurboTax and it e-filed. They could make it a lot better if they wanted to, but  we are too small a constituency.

Of course the best solution would be for Congress to raise the amount that requires Form 1116. It's been $300 for as long as I can remember and $300 just isn't what it used to be.

[MarilynG1]

An appropriate way to enter the foreign income relating to Foreign Tax reported on a 1099-DIV is to use Country 'RIC' (Regulated Investment Company). 

Here's detailed Instructions for Form 1099-DIV.

@ral44 

@sundevil71 

[ral44]

RICs are only for certain types of situations (such as mutual funds that routinely invest in many countries). This has the same problem as using "various". The forms, and thus I assume the underlying tax law, want it done (for individual stocks) by country to limit the deduction in proportion to the income from that country versus total income. So while tricks such as RIC or "various" may satisfy the program you could be filing a fraudulent tax return. 

The program should be flexible enough to allow for taxes paid to the same country to appear on multiple accounts, and understand that  a single brokerage account can involve multiple countries (i.e. own multiple foreign stocks). It seems to be programmed with the simplistic idea that neither of these will be true. I suspect I'll be back to mailing paper returns in the future since there is no indication Intuit (or any competitor) sees this as important enough to correct.

[ral44]

Update: when I tried to e-file it insisted on filling out those boxes linking to specific inputs (1099-Div) on an incorrect basis. That changes the final tax owed numbers. So the only way to get it right I can see is to print out the forms and file as paper. Sigh.