Help needed in claiming foreign tax credit and using form 1116

[umadevi19]

Hi

I need help in filling out Foreign tax credit form 1116 .  I am using CD version

Here is the information as provided by my brokerage to IRS

Box 1a – Total ordinary dividends (1b/2e/5 included)      $1844.45

Box 1b qualified dividends -$ 1783.89

Box 5: Section199A dividends    $1.25

Box 2a: Total capital gain distribution                                    $196.90

Box 7 – Foreign Taxes paid                                                         $234.11

Box 8—Foreign country or US possession                              various

On close verification of foreign taxes paid in 1099.  Year end summary is not provided to IRS

 Here are the details

ticker	Dividend amount paid in 2022	Dividend amount paid /adjusted 2023 for 2022	country	Long term Capital gain	Taxes paid in 2002	Taxes paid/adjusted in 2023 for 2022
1	113.45		Germany	-	29.95	-
2	548.83		Germany	-	144.75	-
3		6.68	Germany	-	1.76	-
4	20.74		Germany	-	5.47	-
5	15.18		Unknown	-	4.55	-
6		22.35	RIC	20.31		22.35
7		25.28	RIC	84.53		25.28
	698.30	54.31		104.81	186.48	47.63

[rogge1722]

Is form 1040 line 18 greater than zero?

[pk]

@umadevi19 , given that your total foreign taxes paid is under the safe harbor limit ( and assuming that you have no carryover foreign tax credit from earlier years ) , why not use the safe harbor option -- by pass the form 1116 and its limitations ?   Do you need help in achieving this  ?   Or is there a different reason why you are compelled to use form 1116 ?

I will circle back once I hear from you .   In the meantime  should I assume that you are US person  ( citizen/ Green Card / Resident for Tax Purposes ), filing single , no foreign earned income etc ?

Namaste ji

pk

[umadevi19]

Hi Pk ji

Namaste. I had been using TurboTax for several years and I have not seen any carryforward amounts. There is no specific reason for trying to use form 1116 except for claiming credit to carry forward or reduce taxes.

Our filing status is married filing jointly. We are US citizens. The income on which foreign taxes paid are primarily from Dividends.

For reasons unknow to us we are unable to see the credit being applied or being carry forward as our foreign taxes are less than threshold and hence tried filling up form 1116

I am not sure about safe harbor option and not sure how to achieve it.

I would appreciate if you can please guide me on this.

Thank you.

[umadevi19]

Hi

I checked 1040 line 18 and is ZERO.

Thank you

[rogge1722]

Since the tax liability is zero,  you cannot use the credit for TY2022.  Therefore:

If the exemption cannot be used in whole or in part, by default it will be lost.  The workaround is to elect not to use the exemption.  Here is the technique.

Go thru the foreign tax credit interview.  Then open the Federal Information Worksheet .  Scroll down to Part 6. The fifth paragraph is labeled  “Foreign Tax Credit (Form 1116).  Checkmark the box to file form 1116.

 Then bring up the foreign tax credit comp. worksheet. Scroll down to the bottom to the carryover section and you should see the credit carried over to 2023.

[umadevi19]

Hi

Thank you for your quick reply.  As I went through the paperwork sent in by brokerage, they had provided a year end summary showing total dividend amount of $857.45 on which a foreign tax of $234.11 was deducted. 

I tried filling up form 1116 using the above amounts but reaching an area called HTKO and did not enter any figure in that. 

 when I reviewed the filled in form, it indicates the following.

Foreign Taxes $234

Adjustments 0 with a note carryback to 2021

Utilized $234

Carryover 0

I hope I filled out the form properly and any guidance will be appreciated.

Thank you.

[DaveF1006]

It depends. if you have no foreign tax other than the amount listed on the 1099 DIV, you do not need a Form 1116 to report this. You might wish to go to tax tools>tools>delete a form>delete Form 1116 and all worksheets that are associated with it to avoid any error messages that may arise from reporting a Form 1116.

@umadevi19 

[pk]

@umadevi19 , Namaste ji ---- sorry for the delay in my response, mafi kordo ji

From the figures you quoted, it seems to be correct.  Please can you see the tax credit showing of  form 1040 line 20  ( comes from Schedule-3 line8).   If these are not there , please would let me know and I will work through  this with you  --- I am not the fastest but ...

Namaste  Uma ji

pk