Problem entering multiple countries for foreign tax credit

[georgef74146]

I am using TT Premier. I have foreign taxes paid associated with dividends paid by three fund companies.  According to the financial company 1099DIV, the countries for taxes are United Kingdom, Various, and Various.  I understood TT instructions to be that to claim tax credit I had to enter all three "countries" separately; however, only the last entry I make shows up on form 1116, and I cannot figure out a way to do the multiples.  Perhaps the problem is using UK, various, and various as the names of the countries.  

Since all the income is the same category (passive dividends), can I just choose various as the country (even I know one of them is the UK) and total the income associated from UK, various, and various as a single entry?  If not, what are the steps to make the multiple entries work properly?

[rogge1722]

 If the payer only lists the source as "various" and the countries cannot be identified, then all you can do is use "various" and treat the 2 as one. With regard to the UK, it does not withhold taxes to US taxpayers. Technically you would enter it in a separate column only to indicate the income from the UK but with no taxes withheld. This would require creating a 2nd fictitious 1099-div which is time consuming. I would just include it with the "various" for income purposes. Thus you will end up with only one column in the f1116. 

[JulieS · Accepted solution]

If all of your foreign taxes are on 1099-DIV, you can select RIC for the country name. That indicates the dividends came through a Regulated Investment Company. In that case you don't have to list them all separately. 

[georgef74146]

Thanks. I would not have thought about the RIC as the solution.

[John T1]

I have paid foreign taxes identified on a 1099-DIV9 and a K-1.    Your suggestion to use RIC stipulates that all foreign income came via the 1099-DIV.    So how do I enter those the individual countries?   Seems like TT should ask if there are multiple countries and if so provide a dropdown allowing entry of the Dividend Amount, the Qualified Amount, and the Tax paid for each country.

[KarenJ2]

Please see the following from Rogge1722

A significant shortcoming of TT is that if you have to fill out Form 1116, it can support only one country per Payer.  In the past, if there were more countries than Payers, using “Various” was the technique used to restore the 1 to 1 country/payer ratio. The following technique restores this 1 to 1 ratio by creating additional payers to equal the number of countries.

This addresses the issue of a 1099-DIV with Box 7 showing foreign tax paid to multiple foreign countries and it is necessary to identify and list the countries individually on Form 1116. This is done by utilizing Dummy 1099-DIV's as illustrated by the following example.

We have a 1099-DIV with Box 7 displaying the total tax paid to 3 foreign countries we will call “A”, “B”, and “C”.

Navigate to the “Here’s the dividend info we have so far” screen displaying the name of the Payer. This will be our Main Screen.  Bring the Payer up in EDIT mode.  Change Box 7 to the amount paid to  “A”.  Click “Continue “.  Either the Main Screen will appear or 2 consecutive screens asking for dividends paid and the source country.  If the latter occurs, insert the data for  “A”, then continue to the Main Screen.

Click on the New Payer button.  We will name this Payer “Dummy1”.  In Box 1a, put a zero.  This prevents TT from issuing an error. In Box 7, enter the tax paid to “B”.  Leave the remaining boxes blank. Click “Continue” back to the Main Screen.

Again open up a New Payer.  We will name this “Dummy2”.  Put a zero In Box 1a and in Box 7 the tax paid to “C”.  Click  “Continue” back to the Main Screen.

Now when we go to the Foreign Tax Credit Interview Section, we are positioned to enter all the necessary data for each country individually.

Now we consider countries “D”, “E”, “F” etc.  
When multiple copies of form 1116 are needed, they have to be created in the right order.
Using TT’s special instructions as a guideline, the following strategy is suggested. Assign to “A” the largest tax paid, then to “B” the 2nd largest and so on through to “F”.  Then when we enter the Foreign Tax Credit Interview Section, we run them through in the same order; greatest to the least.

You may find on part 2 of Form 1116, it is necessary to type in the date for the fictitious Payers which will be the same as the actual Payer, usually 12/31/2018..
Due to recent changes, false errors may appear on the f1116 wks. in part 1, lines 1h, 1i, and 1j. Override them with zeroes to clear the error.
 

[John T1]

Thanks for the work around suggestion, but it is just way too complex.    TT should just allow us to type in a list of the countries along with the amounts for each country.    Making up "Dummy" countries via a long multi-step process is not satisfactory.

[heatherusty]

@JulieS  - Does that apply if 2 of 4 investments are individual stocks? The other 2 are mutual funds. The 2 stocks are on the same 1099-DIV as the 2 mutual funds.

[JulieS]

Yes, it applies to all securities that were purchased through a Regulated Investment Company. If you are not sure whether your broker qualifies as an RIC, just ask them.

[1Charlie61]

We REALLY need a fix on this subject!    It is very time consuming to recreate the wheel each year.

We get 4 1099-Divs each year with up to 14 different countries that we have paid taxes..

It would be nice to have an easy way to enter the data AND efile.

Thanks

[alan-garten]

I've been using this method for several years now, and it's pretty easy once you know the steps.  Just a bit messy with all the 1099-Divs on the listing page....

I came across another question though-

When the Consolidated 1099 dividends and distributions form lists Capital Distributions that came from one of the foreign entities does that amount also need to go on the dummy form?

I'm assuming not, since we're only separating out those dividend amounts for purposes of keeping the taxes linked to specific countries for a credit.

Or should any capital gains for that specific country go on the dummy form?  Probably doesn't matter in the long run?

thanks

[ReneeM7122]

Correct, you will create a dummy 1099-DIV to enter Capital distributions that came from a foreign entity.  

If your mutual fund investment makes a capital gain distribution to you, it will be reported in box 2a.

Here's a TurboTax article with more information about the 1099-DIV.

https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-irs-form-1099-div-dividends-and-d...

@alan-garten

[alan-garten]

Thanks for the quick reply..   

Just so I'm clear.

The same dummy 1099-DIV I create for said company would also have the Capital gains entered on that form instead of the main 1099?

[DaveF1006]

If you have foreign capital gains to report, then yes. Most times this is rare but could be in your case.. In this case, there is no MAIN 1099 because this dummy form is the only1099-DIV form. Just let me know if I misinterpreting your question.

[taxesinthewoods]

Ditto what 1Charlie61 says--TurboTax needs to simplify the process for entering taxes paid to multiple foreign countries and reported on one 1099.   Otherwise, I will be shopping for different tax software next year.