Reporting foreign dividend income

[DeathByTaxes]

I have 2 accounts with foreign income reported on their 1099-DIVs. TT asks me to list the countries (from the 1099-DIVs)  that are the source of this foreign income, so I do this. One account lists 6 countries plus RIC as a seventh, the other account lists only RIC. So I make 7 entries in the TT country list. TT then asks me to "select a country from the list on which to report each 1099-DIV." When I do this, I can only seem to enter the income associated with the first country. When I circle back to enter income associated with the 2nd country on the list, I find that the list of countries has been cleared out, except for that first country. I'm stuck in a loop. Anyone have experience with this?

[Mike9241]

yes a Turbotax headache because only one foreign country, its FTC, and income can be reported on a 1099-DIV.  Since you have 7, you'll need to create 6 additional 1099-Div. one for each source/country. Each 1099-Div must be linked to its own column on Form 1116. To report 7 foreign sources, you would need to create 2 additional Forms 1116. You either do this or use a workaround such as reporting everything on one 1099-Div and using various as the country

[DeathByTaxes]

Mike; appreciate the reply. I am already dealing with two 1099-DIVs, and TT is unable to process these independently. How would it help to break these into even more 1099-DIVs? I would expect the exact same problem to persist. (I should also add that I have VERY complicated 1099-DIVs, so I am disinclined to alter what was auto-downloaded from my financial institution.) It seems to me that a workable solution might be to report RIC as the country for all of the foreign income (on both 1099-DIVs). I believe that I might be able to swing that in TT as I saw both current 1099-DIVs listed when I went after my first country, and TT fails me when I circle back for a second country. Any idea why the IRS wants to know the specific countries?

[AmyC · Accepted solution]

TurboTax is designed with a strict one-to-one relationship between a 1099-DIV entry and a foreign country on Form 1116. When you have one 1099-DIV with dividends from multiple countries (e.g., Canada, UK, and "RIC"), TT lets you assign it to the first country, but then "locks" that 1099-DIV, making it unavailable for the remaining countries.

The IRS technically requires country-by-country reporting on Form 1116 to ensure that the foreign tax credit (FTC) doesn't exceed the U.S. tax on that specific foreign income. However, for most individual investors with "passive" income (dividends), there are two significant exceptions:

RIC Exception: The IRS explicitly allows you to aggregate all income and taxes from Regulated Investment Companies (mutual funds and ETFs) under the single "country" code RIC.

$300/$600 Rule: If your total creditable foreign taxes are less than $300 ($600 if filing jointly), you don't even need to file Form 1116. You can simply claim the credit directly on Schedule 3.

Workaround / Solution Options:

1. Use RIC -the IRS accepts it for brokerage forms

2. Change your 1099 foreign tax to zero for box 7. Create a nwe 1099-DIV for each country and enter the tax in box 7

3. Use RIC for the RIC and Various for the other. This lets the program see 2 different entries.

You may need to delete the 1116 to clear any data issues.

I would use RIC and Various, if it were me. You have the paperwork to show the values are correct. 

[KenDougherty]

>>>TurboTax is designed with a strict one-to-one relationship between a 1099-DIV entry and a foreign country on Form 1116

Which is an incorrect design, and Intuit has known about it for years.

It will take longer to generate fictitious (fabricated)  1099 forms and then go back and generate 1116 forms than it would have taken me to do this section correctly on PAPER!

I guess you are too busy breaking things that used to work to fix the things that are broken.