Foreign tax credit

[cjlang]

I am ready to file but my return is not reflecting my foreign tax credit.  I know Form 1116 won't be ready for another couple of weeks or so.  Is there any workaround?  I seem to recall Form 1116 is not always needed to claim the credit.

[DanaB27 · Accepted solution]

Yes, you can elect to claim the credit for qualified foreign taxes without filing Form 1116 if you meet all of the following requirements:

• All of your foreign source income is passive income, such as interest and dividends, provided that any dividends came from stock you owned for at least 16 days.
• All of your foreign source income and the foreign income taxes are reported to you on a qualified payee statement, such as Form 1099-INT, Form 1099-DIV, or Schedule K-1 from a partnership, S corporation, estate or trust, and,
• The total of your qualified foreign taxes isn't more than $300 (not more than $600 if married filing jointly).

But if you claim the credit without filing Form 1116, you can't carry back or carry forward any unused foreign tax to or from this year.

[lotter54]

When will turbo tax update the foreign tax credit forms?  The IRS has said that they have released the final forms.

[DoninGA]

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@lotter54 wrote:

When will turbo tax update the foreign tax credit forms?  The IRS has said that they have released the final forms.

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Form 1116, Foreign Tax Credit for tax year 2021 is estimated to be finalized and available in TurboTax on 03/03/2022

Go to this TurboTax website for IRS forms availability - https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_online_individual.html

[octoman]

an additional question.  In the past I seem to recall that even if one had over $300 of foreign taxes paid [$600 if married and filing a joint return] that it wasn't necessary to file form 1116.  Has this changed?  if it's necessary to file form 1116 and the mutual fund has not listed individual nations to which it paid income taxes, is there still a way one can use form 1116 by listing nations as "various" for instance?

thanks

[JohnB5677]

Yes, you may be able to claim the foreign tax credit without filing Form 1116, if 

• Your total creditable foreign taxes aren't more than $300 ($600 if married filing a joint return).
• This election isn't available to estates or trusts.
• From Page 1 Election To Claim the Foreign Tax Credit Without Filing Form 1116

This has not changed.

Yes you can use Various.

• You don't need to report income passed through from a mutual fund or other regulated investment company (RIC) on a country-by-country basis.
  • Total all income, in the applicable category, passed through from the mutual fund or other RIC and enter the total in a single column in Part I. Enter “RIC” on line i.  If this doesn't work you can use Various.
  • Total all foreign taxes passed through and enter the total on a single line in Part II for the applicable category.
  • Because computations for inclusions under section 951A are reported on separate Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income, you don’t need to report those inclusions on a country-by-country basis.
  • Enter the total inclusion in a single column in Part l and enter “951A” on line i.
• From page 15 Tip Election To Claim the Foreign Tax Credit Without Filing Form 1116

[octoman]

many thanks.  I seem to remember this procedure from a time when I used to file using hard copies.  As of this time the foreign tax credit module for TT seems to be unavailable though the schedule indicates it will be available late next week.  I'll have to see if the method you outlined will be available in TT, but I recall a few years ago it was.  Last year our total foreign tax credit was under the threshold so no need to use form 1116

[LBMD]

There seems to be an error in TT.  My foreign tax credit is $75, well below the $300 IRS threshold for needing to file an 1116 form.  TT should let me continue without saying that I need to file an 1116, which they have yet to supply even though the IRS has made it available for a week or two now.   TT needs to fix the program to allow those of us who are not required to file an 1116 to continue and file.

[DanaB27]

Yes, if you verified that you qualify to file without Form 1116 then please follow the steps below to finish your return. Please see Claiming the Foreign Tax Credit with Form 1116 for details on when you can claim the Foreign tax credit without Form 1116.

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “foreign tax credit”
3. On the "Tell Us About Your Foreign Taxes" screen select "you have no more foreign taxes to enter than on the 1099-DIV" and "You have no foreign tax credit carryover"

Please follow these steps to verify that Form 1116 isn't included on your return and delete it if necessary:

1. In the left menu, select "Tax Tools" and then "Tools".
2. In the pop-up window Tool Center, select "Delete a form".
3. Select "Delete" next to the Form 1116 in the list and follow the instructions.

@LBMD

[LBMD]

Thanks for the response, but unfortunately it does not help me.  I am using TT Deluxe desktop for Windows.  I have indeed checked the box that I have no more foreign taxes.  It then takes me to screen that says I need to file form 1116.  So if your suggestion works on the online version of TT, it doesn't appear to work on my desktop version.

In addition, my version does not have a left menu.  I have a menu across the top that has a Tools section.  That Tools section has a drop down menu and does not have a delete form option.  So far, all the advice I've seen might work on the online version, but not on my desktop.  Any help would be appreciated.

[DoninGA]

@LBMD Click on Forms.  When in Forms mode select the Form 1116 and open the form.  At the bottom of the form click on the Delete Form button

[LBMD]

I went to the forms section clicked on delete form and it went away.  I then went back to the foreign tax credit section to see if TT would not continue to give me the message that I needed to fill out the 1116.  It still shows that I need to fill it out.  I then went back to forms and the 1116 which I justed deleted was back again.  I even tried restarting TT as soon as I deleted the 1116 form and the same thing happens.  It just won't let me bypass the 1116.  On the form itself it says "you are not required to file an 1116". 

I just can't delete the form or get TT to acknowledge that I don't need it.. 

Any other suggestions.?

[lotter54]

I gave up and am just going to wait until March 3 when TurboTax states the foreign tax credit form will be available. 

[LBMD]

I'm right with you

[LBMD]

I'm still at a loss to understand why TT doesn't correct the problem in the program that would recognize that amounts under $300 don't require an 1116 rather than have us try various work arounds or have to wait for a form that's not needed and as of yet, not available in TT.  I wish I understood their reasoning.