Foreign Tax Credit

[Suejo]

I had $266 of foreign tax, as reported on form 1099-DIV, but TT is only allowing a $16 credit. The usual screen that asks about the related foreign income didn't pop up, so I went to the 1099-DIV form in the "View" window and manually filled in the info, based on the same form in the 2019 TT View window. That made the missing window pop up in the interview questions, but TT is still only allowing a $16 credit. I've never had this problem before. The foreign dividends paid were more than the tax, so that should not be a limiting factor. The composite form 1099 that I downloaded from my broker had some information missing on the Form 1099-B (sales) portion of it... could this be causing the problem, even though the 1099-Div portion was complete? (The missing info won't be available until mid-March.)

[rogge1722 · Accepted solution]

In form 1040, see line 16, the amount of tax.  The amount of credit  allowed on line 20 cannot reduce the tax below zero.

[Jim6402]

I'm having almost the exact same problem with this section. I've yet to get a clear answer on how to enter my information or why the credit is limited. Very frustrating. 

[DaveF1006]

The foreign tax credit is a non-refundable credit meaning that it reduces tax liability based from taxable income.  Chances are that $16 foreign credit reduced your tax liability to zero and will carryover the unused tax credit.

You can carry back for one year and then carry forward for 10 years the unused foreign tax. This means you can amend your prior year's return and apply the unused portion of your carryover or elect to carryforward your unused for the next ten years. 

[SHEILA15]

I HAVE REENTERED MY FOREIGN TAX REPEATEDLY. NO GO

[Jim6402]

I agree with you, I had problems last year and this year entering this information. I only had foreign taxes on a couple of stocks and mutual funds that should have been simply to enter and report. However it was anything but and the online help seemed to know less about the problem than I did. This year my problem boiled down to "the date the taxes were paid", originally I had entered various, finally I just entered the last day of the year. My return was rejected twice by the IRS before I made this change. Turbo tax had approved them for filing and were even less help when it came to figuring out how to fix the problem after they were rejected.  I hate to think what someone with a complicated foreign tax situation must go through with this section. Next year I will be looking at different software or break down and find an accountant. Good luck!

[DawnC]

To avoid making expatriates, military personnel stationed abroad and international mutual fund investors pay taxes to two countries, the Internal Revenue Service gives them a choice: They can deduct their foreign taxes on Schedule A, like other common deductions, or they can use Form 1116 for a tax credit and subtract the taxes they paid to another country from whatever they owe the IRS.    Both the credit and the deduction are entered in the same place. Here's what you do:

1. Make sure you've entered all your foreign income.
2. From within your return, search for foreign tax credit and select the Jump to link in the search results.
3. Answer Yes to Did you pay foreign taxes in 2020 or have credits to use from a prior year?
4. Follow the instructions to get the credit or deduction.

In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through this section.  If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit if your situation requires it.

• What does or doesn't qualify for the Foreign Tax Credit?
• Why doesn't the foreign tax credit show up on Schedule 3, Line 1 of my 1040?
• Can the Foreign Tax Credit be carried over or carried back?

[Bilco]

Dawn, I understand the frustration of the people trying to manage through the foreign tax credit maze.  I am also having issues using the software. 

The TT software instructions for foreign tax credit is just not working.  I have no tax liability for 2020 and so I want to carry the credit over to future years.  In the income interview section for 1099-DIV, I entered the foreign taxes paid in Box 7. 

In the summary page of the deductions and credits next to Foreign Taxes it has $0.  I clicked UPDATE.  The first page confirms that the software registers that foreign taxes were paid and entered on a 1099-DIV.  On the next page I verified I no other foreign taxes to report, ready for a calculation.  This was followed by a page stating the software has verified I met all the requirements for a credit without filling out Form 1116, "but we see no foreign taxes being made."  How did the first page confirm foreign taxes were made and the third page says they are not there.  It instructs one to return to the income section and fill in the proper box in the 1099-DIV page with the foreign tax value. (Did that and the value is still in Box 7)  The last paragraph then suggests, "Select Search Topics or Forms in the toolbar at the top of the screen."  It continues with next step instruction, but there is no such option listed at the top of the page.  Upon hitting the CONTINUE button it took me to a asking if I want a credit or a deduction.  Clicking CREDIT put me back into the Deductions & Credits summary page.

Any suggestions on how to handle this using TT Home and Business 2020 version?

[finallyfenix]

I am using the TT Premier Desktop and it  automatically put the Foreign Tax Paid of $80 into my itemized deductions of Other Taxes. TT did not check which was better, credit or deduction, nor was I asked to select.  How do I fix this because I believe it should be a credit as it was last year. This seems to be a glitch in TT.

[finallyfenix]

I am using the TT Premier Desktop and it  automatically put the Foreign Tax Paid of $80 into my itemized deductions of Other Taxes. TT did not check which was better, credit or deduction, nor was I asked to select.  I did enter the foreign dividend amount of $755 when asked.   How do I fix this because I believe it should be a tax credit as it was last year for me. This seems to be a glitch in TT.

[StanorJim]

TT 202 for foreign dividends and tax credits has been totally useless. I have spent hours on the phone with TTax experts who have not been able to solve the problem. One even asked the software development team to look into the problem. The answer I got from that team was basically "tough, that's the way it is. deal with it." Well, I can't deal with it because TTax won't let me complete the entries so I can't file. I'm wondering if anyone from Intuit reads these posts. TTax has a BIG problem which is now my problem. And TTax is not helping.

[StanorJim]

The TTax foreign tax interview section is totally broken. But TTax won't admit that and won't fix it.  

[finallyfenix]

Jim, I fixed my problem by deleting what I had imported from my financial institution and then reimporting.  It seems so far that has fixed the problem and put the credit in and it is no longer recognized as an itemized tax deduction. I don't believe that section of TT can handle numbers being changed.  Wished someone had told me to just delete the imported section.  I hope this helps you.

[pjmetz]

What do you mean "From within your return,"? What do I do to get in my return?

The search box just give me 500 results to "foreign tax credit."

There is no Jump To option.

[brucefal]

Bilco,

Hopefully this isn't too late, but I was having a somewhat similiar problem.  The issue was that when TT imported the dividend data from Vanguard, it missed the income from the foreign entity that generated the foreign taxes.  To check if this is the issue for you, go to the Forms section, and go down to the FORM 1099-DIV Worksheet.  Look down at the Box 7 entry and it should show the foreign tax paid (Say $200).  Then look at line "d".  It should show the dividend income that generated the tax, (something like $3000).  If the figure is not there, go back to Vanguard (or your broker), get the number and enter it.

In 2019, it was automatically enetered in the transfer process, for 2020 it was missed.  Either a TT problem or a Vanguard problem.

Fo me, when I found the error, I had to file an amended return.