Form 1116 worksheet once again a nightmare

[rcepuch]

For years, the form 1116 worksheet has been remarkably bad, and this year's no exception. Once again , the "Income from Foreign Countries" input area allows for selecting several countries (I need six). Then it says "Select a country from the list... on which to report each Form 1099-DIV." That would SEEM to imply info for each country should be entered separately – but Turbotax won't let you do it. Instead, if you select the first country and then click on Report Income and enter the figures for that country alone, the next screen you get says "You've completed reporting all copies of Form 1099-DIV to a country. Do you want to review your entries?" Click Yes and you're back where you started, click No and the only info accepted is what you've already put in for the FIRST country. Finally after reading old threads here I opted to simply use "Various" to cover all six countries and I itemized them and the relevant amounts in supporting details. That ALMOST worked, but I get error messages on the 1116 Comp Worksheet under Part 1, line 4b(1)b and c, which ask for "Adjusted basis of investment assets generating foreign income" and "Adjusted basis of total investment assets." Huh? As of 12/31/25, I assume? And only for the account in which I actually hold foreign securities? Does anyone know the answer to these questions? And Intuit, if you're listening (which I doubt), for the umpth time PLEASE make it possible to actually enter info for multiple countries!

[pk]

@rcepuch , assuming that you are reporting DIVs from a brokers' consolidated report or from a mutual fund etc., yes you may very well have multiple countries  for source income and foreign taxes paid.  Absent any other specific situations, you should use Various for the source country name, total Foreign source income  and total foreign taxes paid to these countries. Your usage of details in back-up sheet is the best way to proceed.

The basis adjustment is generally not applicable  because most often this relates to adjusting the basis  to allow for tax treaty based  tax rate by the US.  Note that the  allowable FTC is  the lower of actual paid and that imposed by the US and it is also not a refundable credit ( thus may get limited by your otherwise tax liability ).

So , unless you are a directly investing and reaping benefits from foreign source, the adjustment of basis is zero i.e. adjusted basis is the same as the in vested amount ( that generates the dividend/interest / etc. income).

Does this make sense ?   Is there more I can do for you ?

[rcepuch]

Yes, thank you. I am, however, investing directly in foreign stocks. I've tried putting a zero in that box and Turbotax says the number cannot be zero.

[gbacchin]

Indeed!

I cannot submit my return because Form 1116 ALT Line 33 reports 0 instead of the minimum between Line 20 and Line 32. Form 1116 regular is correct instead.

[hccheung]

@pk I am also getting the same error.  Please see the screenshot below.

1. 

[pk]

@hccheung , I agree that the adjusted basis of the investment cannot be zero--- the adjustment can be  and mostly is zero.

Can you give me a little data about your case and let me create that and see where TurboTax is going wrong -- any data would help.

Also did you enter the details and/or items in forms mode  or  in the step-by-step mode or you used a combination ?

  There seems to be quite a few "unhappies" with this FTC .

I will work on this once you give me some data -- yes ?

[hccheung]

Hi @pk .  This is my first time trying to fill out the Form 1116.  I have foreign dividends allocated to Various and RIC (2 1099-Div's).  I saw online that I would most likely get a larger Foreign tax credit using the Form 1116 instead of doing the simplified method of calculating foreign tax credit.  This was also the first time Turbo Tax has mentioned using simplified method of calculating foreign tax credit.  I declined it since I paid over $1k in foreign taxes.  We don't have any investment interest expenses since theses are simply from mutual funds and stocks. I initially filled everything out by going category by category.  The screenshot shown is from when I performed Smart Check and it found 3 items that needed fixing.  I figured that I don't have any deductible other interest, so I figure this section is not really needed so I put zero, but I'm guessing that I probably need to use the foreign income % provided by each broker to calculate the total foreign income (qualified and ordinary dividends) for 2025? 

Row C below contains the portion of foreign dividends by country source.

On another note, we will be MFJ itemizing deductions and are not subject to AMT. 

I feel like Turbotax need to build in more in app explanations for the foreign tax credit and how to fill out Form 1116.  There were unfortunately no popups on this screen for help.

[pk]

@hccheung  I saw and therefore recreated a similar situation for another user  using  Multiple RIC and two separate country.  I did almost all the entries in the step-by-step mode  and then finally went to  the form 1116 Comp wks. and saw a few issue . This is when I saw that the actual worksheets for the  1099-DIV had  no / incomplete entries for  total asset , adjustment and then adjusted basis.  Corrected these and then everything worked fine.  The part that I did not do and will do now, is whether Turbo had any screens asking for  those details -- because absent that  how does the user  know when and what to enter for these entries.   It seems  that Turbo expects the  users of form 1116 to have quite a bit of knowledge about the form 1116  ( generally would be a stretch ).  So let me create the scenario and I will come back in a few.

pk

[Joan2]

I am having a similar issue, but my foreign source countries are all RIC.

Message reads: Form 1116 (COPY 1) -- Foreign Tax Credit Comp Wks: Adj Basis of Tot Inv Ast shouldn't be less than or equal to zero

[pk]

@hccheung  Good News .

I just installed the latest update ( think that was published on Friday -- today is Saturday.

The scenario I used -- Filing status MFJ, W-2 income 85000,   Foreign investment incomes :    RIC#1 - div. income 9000, FTax paid - 1000,  RIC#2  Div income - 5000, FTax Paid -- 500;  Germany  entity DIV -- 3000,  FTax Paid -- 400;  UK Entity Div -- 5000,  FTax paid 350.

 I followed the general  route of :

under personal income tab --- I will choose what I work on  -->   enter W-2 details --> Under Investment group , select    dividend  entry point  and  then  follow through entering the dividend incomes one by one in a round-robin fashion --  Add Investment,  select "dividend  " tablet,  enter the details required, "my 1099-div  has more boxes", enter foreign taxes paid.  Do this till all the  dividends are entered.

Once  Turbo recognizes that  you will have to fill out 1116 ( it seems), it starts to ask more questions such as country of income and whether it is "RIC"  or "Other" .

When all the entries are done, you will get a screen  summarizes everything and asks  " Do you want to Review your Entries ?" --- DO NOT SELECECT YES.  This is because if you do select yes, it clears most of the entries and you have to do everything again.  Select NO.

Thereafter  Turbo will take you to the deductions and credit   and pretty much walk you through  normally.  It will ask about the Foreign Credit, select credit and  simplified method.  You will have to enter again some of the information about the amount of foreign dividend, the foreign taxes  paid and the country etc.  Just go through carefully answering and making sure  that all entries are correct.

Once this is finished, you can run the checks  and/or go to the forms mode and verify that the  entries for 1099-DIV and the  form 1116 Comp. wks are correct.

In my case everything is as expected.

Is there more I can do for you ?

[Joan2]

If I clear out the 0, using the override functionality (on desktop right click->override), this clears the Turbotax error. The 0 appears to come from Schedule A Investment interest, which came Form 4952 Part III 8.

[pk]

@Joan2 , are you saying that you had "nil" interest expense on 4952  ( then why did you need one /  or is it because of disallowed  interest expense ? ) and zero entry created an issue with  form 1116 ?   

Are you using the most recent update version of desktop version ?  or are you using  on-line version ?

[Joan2]

A 4952 was generated for me, I'm not sure why.

Schedule A Line 9 was 0, which came from Form 4952 Line 8, the smaller of line 3 (which was blank) and Net investment income (not zero). Form 4952 Line 8 was populated with 0.

I am using the desktop version and I checked for and installed updates this morning. I had followed the data source helper to see why I had 0 in 1116 Comp Wks Part I 4b1A.

I'm not sure clearing out the field was correct, as my foreign source income was over $5k.

[pk]

@Joan2 , I have not tried  if zero vs. blank makes a difference.  But if  blank works, then I would accept it.  Please go over the form 1116  Com wks. to make sure that you understand  and see the  correct amount of  FTC  shown and also any carry-over -- schedule-B under form 1116.

If you run into trouble, write back and I will simulate your situation and see if I see/understand any issues.

Will circle back once I hear from you --yes ?

[hccheung]

@pk Thanks! It seems the update has taken effect, but I'm still having some issues. It's now asking me extra questions that I didn't see before, so now I'm able to enter 0 for the investment expenses and deductions.   I left it blank.  Is this correct?

When I went through the smart check, it's still throwing errors in the Check this entry and it's still throwing an error.  For Adjusted basis of total investment assets (Line 4b3c), Do I enter the total amount of ordinary foreign dividends received by country? (Various and combination of the 2 RICs)?   Or is this another Turbotax glitch that needs to be fixed? 

I went back and tried doing blanks instead of 0's and I got the same error I originally reported.