Foreign Tax Credit

[brucefal]

Two things: On the multiple entries, just make one entry, enter the country as "Various", and consolidate it.  It works for me.

On a second matter, the tax credit calculation:

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.

[nikesyrena]

I just went through the annual horror story.  What works for multiple countries is to report it all as a single country.  Just make sure your country of choice has a high enough withholding to make it work.  Canada is a good choice.  If the IRS wants detail they will ask and my explanation will be that that it is impossible to file on line without forcing the filing into the software.  Another nuance that showed up this year was the requirement for adding our tax basis for all stock and then for only that portion that produces foreign dividends. I don't recall this from prior years.  In short, Congress has created a mess and Turbo Tax has not made it very easy to navigate the mess.  It took me several hours to get through this, but it was worth it.  

[pjmetz]

Thanks to all the people who replied to my message. I followed the advice of a previous poster who suggested deleting the 1099-DIV and reimputting it. Then I went back to "Easy"Steps, and got shunted along to the instruction where you can select between Sched A (forgot the actual term) and Foreign Tax Credit. My feeble brain can't remember the next choice, but I chose the right one this time and all my problems went away. My $374 credit showed up on the summary page. 

What I learned from last year is that unless you have actual foreign income—other than from an ADR in your brokerage account—or a foreign trust, do not fill out form 1116. If you're on the right path, the EasyStep instructions will have you list your foreign income sources and then ask you to enter an income amount (your ADR dividends). I actually just entered the amount for Denmark and the program went happily on without asking me for the Netherlands amount. Who am I to tilt at windmills? The credit showed up in the right place, and now it's on to state taxes! Personally, I think it's worth it to pay $700 for a CPA! Good luck to you all.

[pjmetz]

I'm sorry you had such a hassle! I didn't have to do the second part (entering basis). I imported my 1099s from Fidelity, so perhaps that all got entered into the tax forms without my knowledge.

Regarding multiple sources of foreign income, I listed the two countries as requested by EasySteps, but when I entered the ADR dividends for Denmark, I wasn't asked for the second country's amount. The steps proceeded blithely along to the end of the section, resulting in the correct foreign tax credit in the right lines of the right forms, Sched 3, etc. Go figure!

[nikesyrena]

Those of you who had foreign source income from 2 or 3 countries are not experiencing the problem faced by folks who have foreign source income from multiple accounts and more than 3 countries.  The Form 1116 only handles 3 countries and the Turbo Tax program seems to assume that all of your foreign source income comes through a single 1099 Div.  If you have 4, 5 or 6 1099 Divs and they have foreign source income from multiple countries, you run into software issues. The solution is to consolidate all of the foreign source income with tax withholdings into a spread sheet and the enter the data as if it all came from a single country.  It works. 

[ezshopr]

Can you clarify this for me?  I have 3 countries that I paid foreign tax to.  All the countries are listed on my 1099 statement.  Do I just enter VARIOUS like someone mentioned and the total for all 3?  If I enter all 3 countries, it makes me select 1 and then enter the income amount but I can't go back to the other 2 as it thinks it is done.  If I try to enter 1 at a time after the first income, it thinks it is done.  Thanks.

[SusanY1]

This year, we are getting reports that tax returns with "Various" are coming back with e-file rejections.  You can re-enter the income in three parts, or select the country that represents the majority of the income and tax, keeping your more detailed records on hand should you need to provide that information at a later time. 

As long as the countries are not prohibited countries (Cuba, North Korea) it will not have a material affect on your tax return. 

[ezshopr]

Thanks.  Can you provide the steps to do this as I can't seem to figure out how to enter more than 1 country.  I have tried entering all 3 in the drop down boxes and then when I go to the next step it wants me to select 1 country and then enter the amount on a step after that.  But then it thinks it is done and won't let me go back to the other 2 countries.  I have tried entering 1 country on the drop down and going thru the process, but still can't enter more countries later.  I would prefer to enter all 3 countries and it seems I should be able to but can't.  Thanks.

[LinaJ2020]

TurboTax only allows you to select one country per payer, unfortunately.  You might want to sum up the number and put it under one country.  Here is the discussion, click here:  Multiple countries

[nikesyrena]

Go back and re-enter all of your 1099 DIVs with foreign tax withholding and when the dialogue asks which country just chose a single country. Germany, France, Switzerland  and Canada have the highest withholding tax rates, so one of them is likely a good choice.   Do NOT enter "various".   Then just go through the dialogue.  Separately, add up all taxes and all dividends from which taxes  withheld  and all foreign dividends from which no taxes were withheld.     When you go into the credit section you will need the tax withholding  information to see if it comes out right.  

When you do the foreign tax credit process ( in Deductions and Dividends listed under the subheading  Estimates and Other Taxes and then scroll down to "foreign taxes".  Run through that dialogue by chosing to take the credit and  it should all be automatic if you entered the 1099 DIV as above.  Go through the dialogue BUT DO NOT try to review your 1099  DIV  entries in the credit dialogue section entries or you will have to start all over again.   Just go through the dialogue and then finish up and the credit should then appear in the main list of Deductions and Credits under the subheading Estimates and Other Taxes paid select  "foreign taxes" from the list and there you should find a total that will approximate your spread sheet total.  When you do the review there be a half dozen more question that come up, such as your total foreign income

( computed on the spread sheet above ), your tax basis for all foreign income producing assets and your tax basis for all income producing assets. 

This section of the Code is a nightmare, but if you have a large credit it is worth a hell of lot more than the deduction so it is worth the effort.  

[pjmetz]

Hi ezshopper:

This limitation is a deficiency in the software. You can only select one country. I may have added up all the amounts and ascribed them to the first country I chose. If you choose the Foreign Tax Credit button, EasySteps will ask for the dividend income, etc. What it's doing is filling out the 1116 form so you don't have to. Evidently, once your credit amount to $600 or more, you have to deal with 1116 yourself.

Good luck!

[daniel-j-morton]

The FTC is not flowing through to the 1040. When I start the FTC section it only pulls in my 1099-DIV but not the 1099-INT. When I look at the 1116 form, cell 1a Gross income from sources within country shown above and of the type checked above is Blank in TT. I tried Intuit help by phone for 2:30 hours but still unresolved. I have deleted the entrees and retyped. Very straight forward, if there is interest income of $10K and I want to use 1116 to show paid taxes of $4K in another country, how can I enter it? Thanks. 

I only have 1 country - Canada. Thanks. 

[nikesyrena]

You have to go into Forms  and link a 1116 to that 1099 INT .  

[daniel-j-morton]

How do you do that? if I go into FTC I am not given a choice. 

[nikesyrena]

If you entered the 1099 INT correctly, it should be the first item that comes up when you go into the foreign taxes section and elect to take the credit. There is an instruction to link each class of foreign income to a separate 1116 form.  The first class to come up are 1099 INT.  I suggest that you delete the 1099 INT and re-enter it.    I just did this in an in process return as a test and that is how it works.