1099-DIV Foreign Tax Credit

[Candace978]

I only have $4.00 in foreign tax credit on my 1099-DIV. TT is forcing me to upgrade to complete form 1116, however according to the IRS website I don't have to complete form 1116 if all of the FTC was reported on the 1099-div (which it is) & meet the other requirements (which it does). How can I still proceed with filing basic edition if it won't let me but the IRS says I cna claim the FTC without form 1116?

IRS language below:

You may be able to claim the foreign tax credit without filing Form 1116. By making this election, the foreign tax credit limitation (lines 15 through 23 of the form) won't apply to you. This election is available only if you meet all of the following conditions.

• All of your foreign source gross income was “passive category income” (which includes most interest and dividends). See c. Passive Category Income, later. However, for this purpose, passive income also includes (a) income subject to the special rule for high-taxed income described later, and (b) certain export financing interest.

• All the income and any foreign taxes paid on it were reported to you on a qualified payee statement. Qualified payee statements include Form 1099-DIV, Form 1099-INT, Schedule K-1 (Form 1041), Schedule K-3 (Form 1065), Schedule K-3 (Form 1120-S), or similar substitute statements.

• Your total creditable foreign taxes aren't more than $300 ($600 if married filing a joint return).

Thank you in advance.

Candace

[Candace978]

Is it an option to not list it as a credit & take it as a deduction even if I am not itemizing & using standard deduction? or is it a problem if the amount is listed on the 1099-div but not reported as a credit?

[LeonardS · Accepted solution]

Yes, you have the option not to take the $4.00 foreign tax credit shown on your 1099-DIV.  This will not cause a problem with your return if you use the standard deduction or itemize your deductions.

[Candace978]

Thank you. I actually just found the same questions and answers from 2019 & was just about to delete my question. I was unable to find the answer earlier so I posted. Thank you for the response. 

[cbdelatorre]

Hi there,

I report $299.28 on foreign tax that is reflected in my 1099-DIV.  Last year, I was able to include as part of 1040/schedule A and not forced to complete a Form 1116.  Per IRS rules, I can report in 1040/schedule A as it is less than mandated amount.  However, TurboTax is forcing me to complete a Form 1116.  I can 't get it to recognize that form isn't needed.  What can I do to avoid 1116.  I do state that I don't need to file tax credit.  Help!  (Thanks:) )

[JohnW152]

There are actually three conditions that must be met to claim foreign tax credit without using Form 1116.  According to the 2021 Instructions for Form 1116, the conditions are:

• All of your foreign source gross income was “passive category income” (which includes most interest and dividends). 

• All the income and any foreign taxes paid on it were reported to you on a qualified payee statement. Qualified payee statements include Form 1099-DIV, Form 1099-INT, Schedule K-1 (Form 1041), Schedule K-3 (Form 1065), Schedule K-3 (Form 1120-S), or similar substitute statements. 

• Your total creditable foreign taxes aren't more than $300 ($600 if married filing a joint return).

That said, if you’re saying you want to delete Form 1116 (i.e., when you say “I do state that I don't need to file tax credit,”) this can be done.  With TurboTax Online open, 

1. If you’re on the Hi, let's keep working on your taxes! screen that displays the categories Personal Info, Income & Expenses, and others in the center of the screen, and none of those categories are open, click the dropdown next to any of the categories, then select the Review/Edit or Pick up where you left off button.  If one of the categories is already open and has a Continue button, select the button

2. Next, in the pane on the left side of your screen, you should see Tax Tools.  Select the dropdown to the right of Tax Tools.

3. Then, under that, select Tools.

4. In the Tool Center pop-up, select Delete a form.

5. Select Delete next to Form 1116 and its worksheet, if present in the list, and follow the onscreen instructions.

If you’re using TurboTax Desktop or a download, please see the TurboTax Help article How do I delete a tax form in the TurboTax CD/Download software? for guidance.

If that wasn’t your question, please explain what you’re wanting to do

@cbdelatorre

[Bullet2022]

trying to e file and keeps giving me an error and brings up a form i\Idon't have how can I get rid of that form

[ThomasM125]

A simple way to delete forms in TurboTax online is to use the Tax Tools menu option, which is on your left menu bar when you are working in your program. Then, choose Tools and then Delete a form.

If you are working in the download TurboTax program, use the Forms Mode on your menu bar to bring up the form you want to delete, then choose the Delete Form option at the bottom of the form.

@Bullet2022

[Falls Church]

This did not answer the question:  IRS says under the circumstances he gave, which also apply to me, the full foreign tax credit can be taken without filing a 1116.  In fact, I used TaxAct for my daughter, given her multiple states, and the full credit was giving without a 1116.  Turbotax wants to force us to limit the credit using a 1116 when the IRS says that's not necessary.  How to we take the credit without the 1116?

[Falls Church]

Also, deleting the 1116 form does not get Turbotax to give you the full credit, so that doesn't solve the problem.

[Falls Church]

Candace,

I don't know if your situation is the same, but my daughter had a small foreign tax in 2020, but no tax liability, so she was not able to take a credit.  Turbotax nevertheless generated a 1116 worksheet for 2020 (just for the file) for the carryover showing no carryover.  This year, Turbotax tried to also throw me into the 1116 worksheet and partial credit.  I ran her taxes on TaxAct to get the free additional state, and that did give the full credit.  I decided to just start her taxes over on Turbotax , this time NOT importing her 2020 information, just putting her personal information, etc., in by hand.  That put me to a screen that verified the IRS language you quoted, and gave her the full credit with no 1116.

Hope this helps.

[MarilynG1]

If you reported Foreign Tax on a 1099-Div, that amount automatically transfers to the Foreign Tax Credit section.

Then, in the Foreign Tax Credit section you enter the dividend income amount associated with this tax.

However, you can elect to take a Deduction rather than a credit reported on Form 1116.  The Foreign Tax is then reported on Schedule A. 

Go to the Foreign Tax topic under Deductions & Credits, and Review.  Choose 'You have no more foreign taxes to enter other than those already entered on a 1099-Div, 1099-Int..' and Continue.

The next screen says 'Must you take the foreign tax credit? We'll give you another option..'

The next screen says 'Do you want the deduction or the credit?' where you can choose Itemized Deduction. 

[cbdelatorre]

First off thanks to all who responded.  

I meet all criteria to default to Schedule A.  When TurboTax (downloaded program).   Income was passive (ordinary dividends);  Foreign Tax is less than $300 and it is reported on 1099-Div.  

I answer "No" to the question if I want to use Foreign Tax credit instead of Schedule A

I answer "No" to the question if I want to report additional foreign tax not already included elsewhere.

I have no financial interest nor signature authority over foreign trust, etc.  

Despite entering the $299.28 in Foreign Tax on the 1099-Div section, when working on the Foreign Tax line of form, it shows $0.  

When I complete the "Smart Check" it still forces me to complete Form 1116.  

I deleted the form and checked my work and it still requires me to complete the form.  

I am stumped, 

Thanks!

[rogge1722]

Is line 18 on form 1040 greater than zero and/or do you have any carryovers?

[DaveF1006]

As a follow-up to rogge1722 response, if you have a carryover, a Form 1116 is necessary to ensure any future carryovers are applied.  Without it, then these carryovers are lost.

If this isn't a concern, try deleting your Form 1116. If in Turbo Tax Online, go to tax tools>tools>delete a  form>delete all Forms 1116 including the worksheets. If you are using the software, go to the forms mode, select the forms and delete from the bottom of the page.