Foreign Tax Credit - Cannot allocate income from countries properly

[rccall]

I am trying to complete the Foreign Tax Credit (FTC) dialog, and I cannot complete it properly.

The essence of the issue -- as far as I can tell -- is that the FTC dialog expects each 1099-DIV to be associated with one and only one country -- which is not the case for me.

I have 1099-DIV forms from three (3) different brokerages.  Each has income from multiple mutual funds/ETFs (called "RIC" in the FTC dialog), and *one* of them has a very small amount of income from a Canadian stock that I hold.

The FTC dialog asks me what countries I received income from -- so I put in both "RIC" and "Canada".

Next, it asks me to pick a country for which I am to report income.  If I pick "Canada" it then asks me which 1099 to use.

Once I've done that, I try to allocate the RIC income -- but for the brokerage that had both RIC and Canada income, I no longer see the 1099.  So evidently TT thinks that a 1099 can be allocated to only one country.

No matter how I play with the dialog, I can't get it to record my information correctly.  I even got a TT rep on the phone who basically led me past that dialog, and to another page where I could (supposedly) enter Country and Income information "by hand" -- but even that didn't work for me.

The really frustrating thing about this is that it's been an issue in TT for years now.  Every year the dialog and its behavior changes a little, but the problem remains that TT can't understand that one 1099 may have income from multiple countries.

For the moment, I just allocated everything to RIC, including the small amount that belongs to Canada.  But I'd like to do it the correct way.

Is there a workaround I can use that will get me through the TT dialogs?

If not, should I go into the forms and tweak the amounts on Form 1116, adding a column for Canada?  (I'm a bit anxious about doing that, for fear I'll really mess something up.)

Thanks for any suggestions.

[seghezzo]

Exactly the same problems I  have and posted a few hours ago. There was a reply but cannot find it

[MarilynG1]

You can associate the Foreign Tax paid on a 1099-Div with multiple countries by choosing 'RIC' (Regulated Investment Company) as the Country.

For a second 1099-DIV, do the same.

If your Canadian income/tax is not associated with a 1099-Div or 1099-Int (a pension, for example), then choose 'Passive Income' and the country Canada.  You'll have a 1116 for RIC and for Canada.

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

@rccall

[rccall]

Hello Marilyn,

Thank you for the reply, but I'm afraid I need further clarification.

It's my understanding that RIC is used for income from mutual funds, ETFs, and the like.

I am trying to record, for one 1099, income that comes from a particular country (Canada) as well as income from RICs.

Am I incorrect in thinking I need to report the Canada income as Canada income (and not as RIC) ?

[MarilynG1]

No, if the foreign tax and foreign income are reported on one 1099-Div, then RIC is the correct way to report.

[seghezzo]

Marylin, I do not agree with response. Why the Companies issuing the 1099 (Fidelity etc) give you detailed info on the country related to foreign tax. They report Both RIC for taxes paid by mutual funds and they give details for the countries associated with dividends of individual shares you own. In my specific case, I have one 1099 that has foreign income on individual stocks from Sweden, Finland and Netherlands. If I choose one 1099 and one country and input the value for that countries, I will neve again that 1099 to complete the income form the other countries. This behavior is not correct.

Regards

[eeterrific]

That is not what a RIC is.  You're misleading people.  There are very specific qualifications for RICs.  They are passthroughs.  IRS specifically asks to record countries, amounts, and dividends.

[seghezzo]

I do not believe I am misleading anything. In effect I was trying to report correct countries in Turbo tax and could not do it or I did not know how to do it.

I had 2 1099 from investment, in one I had foreign taxes paid to specific countries. in another I had only foreign taxes for RIC.

Second 1099 was easy. I put RIC when asked. But how do I do 3 or more countries in other 1099?

I will be happy to receive help on this

Regards

[eeterrific]

I am having trouble entering multiple company ADRs into TurboTax, from multiple brokers.  It is not working.  I paid for premium, and it does not comply.  I have tried to message Turbo Tax that I would like them to fix it or give me a refund.

[eeterrific]

Please show where IRS regs allow that.

[seghezzo]

CAn you please be more specific on what the IRS should allow or not?

Thanks

[MonikaK1]

If you are a shareholder of a mutual fund, or other regulated investment company (RIC), you may be able to claim the foreign tax credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. You should receive from the mutual fund a Form 1099-DIV, or similar statement, showing the foreign country or U.S. possession, your share of the foreign income, and your share of the foreign taxes paid. If you do not receive this information, you will need to contact the fund. See this IRS webpage for more information.

If you don't see specific countries mentioned on your 1099, you may see the designation "RIC", for Registered Investment Company. You can safely use the designation RIC in TurboTax for purposes of labeling the dividends for foreign tax credit purposes if the fund is passing on the credit to shareholders.

If all your foreign-taxed income was 1099-reported passive income, such as interest and dividends, you don't need to file Form 1116 in order to get the foreign tax credit, provided that any dividends came from stock you owned for at least 16 days, though you will need to answer the questions in TurboTax.

Please see this tax tips article for more information. 

@eeterrific If you still need assistance, please describe in more detail the trouble you are having with entering multiple company ADRs into TurboTax, from multiple brokers.

[seghezzo]

Tanks Monika. Very clear to me what you say. Here what my problem was:

-I have a 1099 from brokerage which has foreign tax for 3 individual stocks (and their countries)

-And some foreign tax paid by mutual funds grouped under RIC

During interview I am presented with the foreign tax and asked to declare value and country. If I enter value and country for one stock, I am never asked to enter the balance, if any.

How can I enter the information correctly?

Thanks

[DaveF1006]

To clarify, what section of the return are you working in and asked to enter the value of the stock?

@seghezzo 

[seghezzo]

In the section for foreign tax credit. But also at the import of data from broker, it asks for country but it does not give the possibility of putting more countries and their relative value of income and tax