Form 1116 worksheet once again a nightmare

[dhawal55]

Thank you for the response @MarilynG1 

Yes, all of my foreign income is from 1099-DIV. I have them entered under 1 entry marked as "various". I filled out the 1116 questionnaire and the final form generated by TT doesn't makes sense. It takes 75% of my foreign income and puts it under 1a,  3d is right and 2e is 4x my gross income. It would be just easier to enter the 1116 manually. TT questionnaire for 1116 is not helping and the form output is totally incorrect. Many people have complained about it for years and there has been no improvement

[MarilynG1]

If all your Foreign Income was from 1099-DIV entries, the Foreign Tax was automatically transferred to the Foreign Tax Credit section.  All you need to do is enter the amount of Foreign Income associated with each 1099-DIV  Use Country 'RIC' as the source and select all your 1099-DIV's.  For each dividend entry, enter the total amount of Foreign Income. 

You could delete Form 1116 and step through the Foreign Tax Credit section again.

@dhawal55 

[rcepuch]

As I've noted repeatedly, using the "RIC" approach does NOT work for those of us who hold individual foreign stocks. It's probably fine for Registered Investment Companies (genuine RICs) such as mutual funds and ETFs, but those of us who hold shares traded solely on exchanges outside the US need to complete separate columns for EACH country involved – and Turbotax needs to incorporate that into its interview. Right now the only way to do it is choose the forms menu and manually complete as many Form 1116s as necessary (each can only accommodate three countries), checking very carefully to make sure all required info is entered. Each 1116 SHOULD then feed info to the totals shown on the first 1116, but CHECK TO BE SURE THAT HAPPENS. And Turbotax, FIX THIS!

[pk]

@rcepuch , there is a lot users having issues with form 1116.  But my struggle is that  for every case that I have replicated, using Windows Desktop " Home & Business" ( with the latest update), I have not been able to  find the issue seen by the  poster.  Granted, often the screen questions are quite unclear , confusing and/or easy to mis-interpret the intent, I am desperate to duplicate what the user is seeing.  Something I am missing.

You are correct that in the  scenario you present, RIC is not the correct category --- you need to enter each country name, the foreign source income from that country and the  Foreign tax paid to that country.  But I just handled another user's scenario with  Dividends from four different countries and could not make it fail -- Turbo behaved as I expected.  But it did frustrate me many times --- the screen texts were not clear.  The only advantage I have is I am aware of what the form is trying to do and therefore perhaps persisted  to get the correct answer ( with multiple "back" selections ).  I did this all in the step-by-step and confirmed the  entries  ( when all done ) by going in to forms mode.

Can you spend a little more effort ( frustrating as it would be and I apologize for that in advance ) and tell me exactly and in detail what your scenario is  -- both the income area entries and then in "Deductions & Credits" area, including the steps/screens etc. in entering the  form 1116 entries ?  Please.  I would  like to recreate your situation and see if I can create the errors that you are seeing.  Thank you 

[rcepuch]

I've already filed and I'm not willing to go back into my return to recreate the issue, but the key point is when TT asks, in the interview, for me to choose from a pulldown menu the countries from which I have foreign income. (I have foreign income from SEVEN countries – Canada, Netherlands, Japan, Belgium, UK, Switzerland and Australia - via two brokerage accounts.) Then when I complete the FIRST column (representing merely the foreign income from ONE country and ONE brokerage account), TT tells me "You've completed all copies of a Form 1099-DIV" and it will not let me do anything else. But no, I haven't completed the process – not at all. TT is clearly assuming everyone has foreign income from mutual funds or ETFs, not individual stocks, and can therefore lump everything together and use "RIC." The ONLY way around this I've found is to manually complete as many 1116 forms as needed (in my case, three of them). This involves filling out the A, B and C columns in Part 1 and (importantly) Part 2, then checking to make sure everything from all Form 1116s conveys to line 35 in Part 4 - and that the number there appears on line 1 of Schedule 3 and is part of (or identical to) the number appearing on line 8 of Schedule 3 and finally on line 20 of the 1040 itself. TT's interview doesn't even attempt to walk people through this messy process!

[pk]

@rcepuch , ah yes!  I understand  that situation.  Thank you for sharing.   Yes , in my case mentioned  above, I found that Turbo arbitrarily included some countries and not  others --- the table that you mentioned.  So I stopped at that screen and  updated  the countries list line by line. Thereafter it walked me through each country ( from the list  )  asking for  foreign source income, taxes etc.  When all done and I went to forms mode , I found that for each country ( in all the  1116 copies ) the  Foreign Taxes  "Paid/Accrued"  was not checked ( RED ) and the paid date was blank. Corrected these and everything was correct.

Yes , it could be done a lot better.  I am hoping to raise a request for  this  (post 4/15) to powers be. 

Again thank you for sharing

[dhawal55]

• @rcepuch Thank you for the response. The foreign income is from a professionally managed account and i have received only one form 1099-div. As many others have mentioned, TT doesn’t allow breaking into each country as the questionnaire lets you pick the form 1099-div for 1 country only.
  What you are suggesting is orthogonal to my complain. Even for one country, the math is messed up and this is a very poorly designed experience leading to incorrect reporting

[MarilynG1]

The FTC interview is set up to easily accommodate the entry of Foreign Income where Foreign Tax has been automatically transferred from a 1099-DIV entry.  In your case, you'll need to enter the Foreign Income associated with your 1099-DIV first  (use Country RIC and total amount of foreign income), then Continue to the 'Country Summary' and 'Add a Country' if you have other types of passive foreign income/tax to report.  Your Form 116 Worksheet for passive income will show Country RIC for the 1099-Div, and any other countries.

If the other income is not passive income, Continue through several screens until  you reach the FTC Summary. Choose 'Add a Foreign Tax.'  Choose the income type and enter details. 

Here's more info Claiming the Foreign Tax Credit. 

@dhawal55 

[dhawal55]

@MarilynG1 I followed these steps to enter my Foreign Income. However, TT throws a review error in the final review stage and that complicates the Form 1116. It than asks for few more questions like passive income and Foreign Income, but line 1a has some random number (about 75% of my foreign income) and line 2e has a very high gross income. I have updated my gross income to match the adjusted gross income (line 11a) from Form 1040. But i'm unable to update line 1a

[MarilynG1]

The Foreign Income amount in Box 1a on Form 1116 comes from the Foreign Income amount you entered in the FTC interview related to your 1099-DIV's.  You may want to step through that section again, after deleting Form 1116. 

Once you enter the Foreign Income amount for each 1099-DIV individually, the total of what you entered is displayed in 1a.  If this is the only Foreign Income you had, you could leave the interview at that point.  There are a number of questions following about foreign expenses related to the income, other types of foreign income, etc. that don't apply to you. What is the error you're getting in Review?  

Line 2e is NOT related to your AGI from your Form 1040, so don't change that.  It's a complicated computation, which includes:

Form 1040, lines 1, 2b, 3b, 4b, 5b and 6b plus
Schedule 1 (Form 1040), line 1 plus
Schedule 1 (Form 1040), line 2a plus
Schedule C, line 7 (all copies) plus
All gains reported on Schedule D minus Schedule D, line 11, Subtotal Line A(Form 4797, Gain from Part I) plus
All gains reported on Form 4797 plus
Schedule E, line 3 total plus line 4 total plus 
Schedule K-1 Worksheet - Estates and Trusts, Box 14 Code B : Foreign Tax Information section, line 7 (if it has a value); otherwise income reported in Part III lines 5, 6, 7 and 8 plus
Schedule K-3 - Partnerships Line B - Gross income from all sources
Schedule K-1 - Partnership Additional Information page 1, Box 11 section,Code A, line 1 (if positive) and line 3 and line 4 and Code I, line 5
Schedule K-3 - S Corporations Line B - Gross income from all sources
Schedule K-1 - S Corporation Additional Information page 1, Box 10 section, Code A, line 1 (if positive) and line 3 and line 4 and Code H, line 5
Schedule F, line 11 (all copies) plus
Form 4835, line 7 ( all copies) plus
Schedule 1 (Form 1040), line 7 plus
All positive income amounts on the Other Income Statement.

@dhawal55 
 

[dhawal55]

@MarilynG1 
I deleted the form and completed the Foreign Tax Credit section again, which is easy since I only have income from dividend (from 1099-Div). However, I run into review error again. Others have complained about the same issue as well - https://ttlc.intuit.com/community/tax-credits-deductions/discussion/foreign-tax-credit-qual-div-and-...

 My "Total Foreign Income" is 5x the "Total Foreign Tax Paid", but I still get this error

[MarilynG1]

Check your 1099-DIV entry for Boxes 1a, 1b, and 2a.  If you imported your form, you could delete and re-enter manually.   Foreign Tax paid is in Box 7.  This may relink it to the Foreign Tax Credit Form 1116 properly.

@dhawal55 

[dhawal55]

@MarilynG1 I was able to resolve the Review Error by enter the Qualified Foreign Dividend in the box. However, in the final form 1116, I see a different value and its due to "Adjustment required for QD/LTCG" (k in Foreign Tax Credit Comp Wks) and it reduces my  "New Qual Div" and "Adjusted Gross Income". This is the part that was confusing me but it seems this is legit