Credit on foreign tax paid: Turbotax does not allow one to list multiple countries and itemize the taxes paid in each one.

[cjn2]

@JulieS,

Those instruction seem to specifically refer to "mutual fund or other RIC ".  Are you saying this is the proper handling for individual stock holdings in several countries as well?

[cjn2]

@LindaS5247,

"It is fine to use various or RIC. Unless it is necessary to break down the taxes paid on a per-country basis (which is not common)."

The IRS seems to expect the per-country breakdown when individual stocks (ADRs) are involved. Regarding your comment, what is an example of a not-common case where per-country breakdown is necessary?

[nikesyrena]

If the RIC (Regulated Investment Company) work around works I would try it, but if that is the work around, it sure would be nice if they would put it in the software.   

[SusanY1]

The IRS does allow "Various" when reporting for the most part.  The country-by-country accounting would be required in cases of taxes paid to sanctioned countries (such as Cuba) or are subject to "High tax kickout" (HTKO) rules.  HIgh tax kickout occurs when the tax paid to the other country exceeds the highest possible tax rate on the same category of income.  

For example, if a taxpayer sells a capital asset in a country where capital gains tax is 50%, the tax credit will take into account that the income won't be taxed at a rate higher than 20% in the US. 

The country-specific reporting could also be necessary when reporting income from countries with which the US has a tax treaty that lowers the rate of tax on a particular type of income.   It won't always be required in this case, but is required if the mandatory withholding rate on the income is higher than the actual tax allowed by treaty.  

That income would need to be reported separately for the credit to be calculated properly. 

Individual stock holdings could be aggregated together in some cases, but not in others.   Brokerage firms vary in the way that they handle and report foreign taxes paid.  

If there is doubt about whether or not any of the taxes could require a credit adjustment based on HTKO or treaty rates, then it is best to report them separately.  

[cjn2]

@SusanY1,

Quoting from a Learn More link within TT:

• Foreign Country
• The IRS requires the Foreign Tax Credit to be calculated on a country by country basis. Your Forms 1099 and other financial statements that report foreign tax paid should indicate what country the tax was paid to. If you have a statement showing foreign tax paid, but it does not indicate a country, you may need to contact your financial institution to find this information.

And When should I select "Various?":

• Using "Various" to report foreign income
• When you have foreign income from multiple countries, the IRS requires you to report it per country, unless it comes from a Regulated Investment Company (RIC).
• But, sometimes financial institutions don't give you enough info to figure out how much income came from each specific country. In this scenario, we allow you to select "various." You just need to make sure all income you report as "various" falls into the same income category so your tax info will be correct.
• If you're able to break down your foreign income by country, the IRS requires you to report it for each country individually. To do this:
• 1. Go back to Dividends with your Form 1099-DIV (or sometimes it's reported on a Form 1099 or K-1)
  2. Report each country's income source on its own form
  3. Make sure the total adds up to what's reported on the original form
  4. Return to Foreign Taxes to complete the rest of your info
• Example: Let's say your Form 1099-DIV reports $1,000 in dividends. $100 from France, $50 from Canada and $850 from the US. Rather than entering one Form 1099-DIV, you'll enter three of them. The first copy is for $850 with no foreign tax since it's US income. The second copy is $100 with foreign tax equal to what you paid France. The third copy is $50 with foreign tax equal to what you paid Canada.

Your product (assuming you represent Intuit) makes it pretty clear that I must break down by country if I am able to.  However, your recommended process is painful, putting it kindly.  Here it is April 2, 2024 and Fidelity has sent out 3 corrected consolidated 1099s.  If I had modified what I had imported, then I suspect that I would have to repeat hacks on the downloaded 1099-DIVs over and over again.  Highly error prone and tedious.

Since this has been a problem with your software since at least TY2018, I assume it wont get the love it needs any time soon. 

Also worth noting, in order for the Various hack to work, the RIC info must also be lumped in with the ADRs/stocks per country, since having separate RIC and Various lines forces the same hacking on the 1099-DIVs.

As a noob to this problem, here's how I think it should work, at least for the passive category:

• Create a step-by-step flow that asks for the per-country info:  non-qualified div, qualified div, interest, total foreign income, and foreign tax paid.  I would much prefer a table entry than many screens to click through for each country. Better yet, extract the info automatically from the consolidated 1099 downloaded from the financial institutions.
• Ask to select all the 1099-DIV docs that cover the the country break down.  The totals should match.
• TT builds the necessary form 1116s per the IRS requirements (such as 3 countries per form, largest credit on the first form, ...)

[williasp]

@cjn2I agree with you 100%.  There's no excuse for making what should be simple that complicated.  Who in their right mind is going to manually create multiple 1099's just to capture individual country taxes?  That's an insane workaround and a recipe for errors.

I only have two country taxes in modest amounts, so I just use "various" and let the IRS write to me if they don't like it.  So far, I haven't had a problem.  But I can understand a taxpayer's discomfort if they have multiple foreign taxes consolidated on their brokerage account 1099.

The problem for most of us is we want to use TT to make tax filing easier, not harder.  It's a big pain in the butt when you smoothly proceed through the tax input process, then get stuck on some ridiculous problem with no guidance how to solve it.

I sold out of my MLP positions years ago because inputting the K-1's was more trouble than it was worth.  I'd hate to find myself in the same boat with respect to owning foreign stocks, like Toyota.

[Periwinkle65]

     I have also sold stocks to avoid k-1s . The good news is that some companies are now providing downloads of k-1’s into TT. The bad news is that the 2023 file was not compatible with the desk top Premier. I spent 2 days consulting with TT and the Tax Package team to determine the problem! 
      Returning to the 1116 Form issue, there seem to be many different interpretations. Like you, I have taken the simplest approach, realizing that I could later adapt should the IRS question. It  was recommended by an IRS  agent contacted years ago that I put all passive foreign income on 1 1116 form.  This year, I tried summarizing the foreign source income from 2 brokerage accounts as VARIOUS. Yet, when I tried to check my figures by doing the interview, confusion reigned! I should have about $3,000. in foreign tax credits which comes from 30 different countries. I doubt that the IRS would appreciate the additional pages to provide these details! 

[craig miller]

what!  I have three different  dividends from the same company  but reported by two brokerages and a third reports to me directly.  What do I do?  I can't enter an additional source?

[NCBeeman]

Susan,  I am replying to you because you are the most recent employee to post to this thread.  

Frankly, I share everyone else's frustration.  I've read through this thread, and there seem to be different methods folks have used, each claiming they've worked for them.  All this advice has left my head spinning.  I'm hoping you can help me figure out the best approach for my specific situation.  

I own stock in a Canadian company that pays good dividends, which Canada taxes generously.  The taxes paid are greater than the $600 limit for filing jointly.  

I also have a large number of stocks managed by a financial services company, including some foreign companies.  On the 1099-DIV, they list a single "Foreign Tax Paid", and "Various" for the "Foreign Country or U.S. Possession."  (The total taxes paid is well under $600.)  However, in the Supplemental Information section, a detailed country-by-country breakdown of the foreign income and taxes is provided.  

My question:  Do I need create a bunch of "dummy" 1099-INT's for the countries (and U.S.) managed in my stock portfolio account, or can I simply enter information for "Canada" (for the single stock) and "Various" (for the managed portfolio) in TurboTax?  

And in case it isn't clear, my intent is to file for the credit.

Thanks so much for any advice/direction you can provide!