Why is TT not letting me get credit for $280.72 Foreign Tax Paid that shows on my 1099-DIV. It says: Looks like the Foreign Tax Credit doesn't apply this year no explan?

[Anonymous]

I cannot enter on form 116.

[JohnW152]

It's possible that you don't have any tax for the credit to offset, or you may not have paid foreign taxes that qualify for the credit.

You can only claim the credit if you paid, accrued, or owed taxes on foreign income that also was subject to the U.S. income tax system.  The tax must have been an income tax, or a tax in lieu of income tax, that was imposed on you, and was a legal foreign tax liability.

Please see the TurboTax Help articles What does or doesn't qualify for the Foreign Tax Credit? and Why doesn't the foreign tax credit show up on Schedule 3, Line 1 of my 1040? for more possibilities on why you may not be receiving the credit.

[Anonymous]

I've read all the articles; I have other income to report, foreign tax was paid (as reported by Fidelity). I talked at length - maybe even an hour - with a TT representative. We tried various ways to get the system to accept the foreign tax payment to no avail. I believe there must be a flaw in TT system, which I hope can be fixed before next year!

[ThomasM125]

If the foreign tax is reported in box 7 on your 1099-DIV and your total foreign tax is under $300, the credit should automatically be applied to your tax return. You can look on schedule 3, line 1 to see if the amount appears there. The only reason it would not appear is if there was no tax listed on line 18 of your form 1040.

You can view your form 1040 and schedules 1 to 3 while working in the online version of TurboTax by following these steps:

1. Click on Tax Tools in the left menu bar
2. Click on Tools
3. Look under Other Helpful links….
4. Choose View Tax Summary
5. Look in the left menu bar and choose Preview my 1040
6. Scroll down the page to see form 1040 and schedules 1 to 3

[RJC4]

Similar Problem. TT is limiting the foreign tax credit to a fraction of the amount paid through the broker, $32 out of $398 paid. The full amount had been credited in several previous years' TT returns, and this year's taxes are almost identical to them in each category and each IRS form. Either there is an error in the TT system, or IRS has altered foreign tax credit rules for 2022.

[DaveF1006]

The IRS limits the foreign tax credit you can claim to the lesser of the amount of foreign taxes paid or the U.S. tax liability on the foreign income. The excess limit is created when the U.S. taxes on that foreign income are greater than the foreign taxes paid.

Without being able to look at your return, it is difficult to speculate why you only received credit of $32.  If you didn't receive the full credit this year, the excess amount will be carried forward for up to 20 years until it is used up to offset foreign income reported during this period of time.

In your case, did you have a Foreign Tax Carryforward  carryforward from last year? If so, this may have been used first before applying this year's FTC.

[RJC4]

Nice catch. I think that does explain some of what is going on here, at least $111 worth. The other issue, the bulk of the credit shortfall, I think is due to the fact that TT does not retain more than one country payer in the dialog mode. It only holds one country's payment(s), so if you attempt to add another country, the prior entry is lost.  A work around is to combine all foreign income under "various" in the country dialog box. That way the full amount of foreign tax payments go into the calculation with one entry. This should not present an IRS problem as long as you are not receiving income from some place like Iran which is restricted. Otherwise, I believe you can switch to manual entries on the form 1116 and include however many country payers you have.

Thanks!

[BillM223]

You taxpayers who are reporting FTC issues, are you using the Online TurboTax product or the CD/download product? There may be an issue with the CD/download product not automatically resolving the FTC credit whereas the Online product does.

However, as noted above, if you have the CD/download product, you can go into Forms mode and manually enter the values to get the credit to apply.

@RJC4 

@Anonymous