Need help filling out form 1116

[pkrabbendam]

Please help. I seem to be going in circles but cannot find where to enter the form 1116.

I have three (fairly small) income sources from the country where I used to live: 

- its version of Social Security, and

- pension from employer 1 and employer 2.

All three have already deducted income tax and obviously I don't want to pay taxes on it again.

Can you give me step by step instructions where to enter the numbers and whether that is in euros or USD.

Thanks much in advance!

[JamesG1]

When entering information for IRS form 1116, you will have a choice to take a deduction or a credit.  You will report in US dollars.

To view multiple copies of IRS form 1116 in TurboTax Premium Online, follow these steps:

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Deductions & credits.
3. Click the down arrow to the right of Estimates and Other Taxes Paid.
4. Click to the right of Foreign Tax Credit.
5. At the screen We'll check if you're eligible, select Continue.
6. At the screen Did you pay taxes on income, select Yes.  Continue.
7. At the screen Let's get a little more info. select Continue.
8. At the screen Foreign Taxes, select Continue.
9. At the screen Do You Want the Deduction or Credit, select Take a Credit.
10. At the screen Reporting Foreign Taxes Paid, select the hyperlink special instructions to see to the right Special instructions when multiple categories of foreign income are present.

The instructions state:

After completing the interview the first time for the largest item, then you can revisit the interview and report any other items you have. 

(Note: "completing the interview" involves answering Yes to question about being done with "all Foreign Tax Credit Computation Worksheets.") 

This will generate the additional copies of Form 1116 that you need, and they should be in the correct order.

Sample situations are included.

See also this TurboTax Help.

[pkrabbendam]

Appreciate the response but your instructions are for TT Premium Online whereas I use the desktop version, so things are a bit different.

In the Estimates and Other Taxes Paid section (of Deductions & Credits under Federal Taxes) I click Update right of Foreign Taxes. Foreign Tax Credit, "you paid foreign taxes on 1099-DIV....", clicked Continue.

Next screen: I *do* have more taxes to enter so leave that box unchecked. I don't have carryovers, so check and Continue.

Next screen, Continue.

Next screen, Take A Credit.

Next screen, Reporting Foreign Taxes Paid, Continue.

Next screen, which says "Where did you receive dividend income from?" I select the country. Note "dividend"

Next screen, Income From Foreign Countries, click Report Income.

Next screen lists the two brokers where I have an account and indeed received foreign dividends, but I cannot enter the pension and "social security" income...?

Moreover, I already entered those income amounts under the Miscellaneous Income (in the Less Common Income" section of Wages & Income); should I not enter them there?

Last concern is obviously what and to how to deal with the earlier mentioned foreign dividends; do those also require their own form 1116?

Sorry to be a pain in the neck but this is far from intuitive (pun intended) and Intuit can sure improve in this area. I really appreciate your help!

[MarilynG1]

If you already entered your Foreign Pensions in Miscellaneous Income, you don't need to report them again in the Foreign Tax Credit section, unless you reported the Gross Income amount and wish to take a credit for tax paid.  If you don't want to take the credit (you could test both ways), enter the Net Pension Amount. 

If you want to calculate the credit, continue past the Dividend questions in the Foreign Tax Credit section until you reach a screen that asks if you have 'any other foreign income to report'.  Then choose either 'general category income' or 'passive income' from the next screen, and you will be asked for the amount of income, amount of tax paid on that income, and whether paid or accrued. 

Yes, TurboTax will prepare a Form 1116 for different types of foreign income. 

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

@pkrabbendam 

[pkrabbendam]

I was finally able to get to form 1116 but need to review everything again, so please don't close this yet.

Thanks for your efforts thus far!!

[IndianExpat]

@MarilynG1 @JamesG1 

I am bit confused. Do you report sale price or (sale Price - Buy Price) for Gross Income for property sale?

[MarilynG1]

To claim a Foreign Tax Credit for a property sale, report the income amount you were taxed on by the Foreign Country (and the amount of Foreign Tax paid).  This was probably your net proceeds and would be reported as General Category Income in the FTC section. Convert foreign currency amounts to US dollars at the prevailing rate when the tax was paid.

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

For US taxes, report it as a Sale of Investment property in the Income section.  Go to the "Wages & Income" section and select "Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)".

1. Add Investment: Choose "Other" (for land, second homes, etc.) when asked for the type of investment.
2. Enter Details:
   • Description: Enter the property address and mention it is foreign.
   • Dates: Enter the acquisition and sale dates.
   • Proceeds: Enter the sale price converted to USD.
   • Cost Basis: Enter the original purchase price (or fair market value if inherited) in USD.

@IndianExpat