Do i need to do a form 1116 for $1.58 in foreign tax paid?

[GeoffreyG]

The answer to your question is that it you do not absolutely have to claim a foreign tax credit, using Form 1116, if you do not want to.  As a taxpayer you have the election, or option, to forego a foreign tax credit claim if you wish (or to alternatively claim a Schedule A "itemized deduction" instead).

One valid reason for doing so, for example, would be if the amount of the foreign tax credit is relatively small, and you do not want to purchase (i.e., pay for) a TurboTax software program upgrade just to be able to make the credit claim.  That would be a rational, and understandable, decision.  So as well would be a choice not to complete, and print, Form 1116, if your foreign tax credit amount is relatively small and you are paper-filing your tax return.

For example, in your case and faced with claiming a $1.58 foreign tax credit, it does seem reasonable that you might not want to do so by filing Form 1116.  In this instance then, you do have to take a foreign tax credit if you do not want to.

Thus, if you don't care about your foreign tax credit claim, then you can safely leave the related information (from Form 1099-DIV, Box 6, for example) off of your tax return.  That way no foreign taxes paid amount will be indicated on your tax return, and the program will not ask you to upgrade to claim the foreign tax credit.  Or, you could chose the "deduction" option in the TurboTax foreign tax credit interview.

In other words, neither the IRS nor anyone else is going to make or "force" you to take a valid tax credit (or alternatively a deduction) that you do not wish to; and you don't have to file Form 1116 if you don't want to.

Thank you for asking this question.

[PN10]

Election To Claim the Foreign Tax Credit Without Filing Form 1116

Excerpt from IRS Instructions for Form 1116:

You may be able to claim the foreign tax credit without filing Form 1116. By making this election, the foreign tax credit limitation (lines 15 through 21 of the form) won't apply to you. This election is available only if you meet all of the following conditions.

1. All of your foreign source gross income was “passive category income” (which includes most interest and dividends). See c. Passive Category Income, later. However, for this purpose, passive income also includes (a) income subject to the special rule for High-taxed income described later, and (b) certain export financing interest.
2. All the income and any foreign taxes paid on it were reported to you on a qualified payee statement. Qualified payee statements include Form 1099-DIV, Form 1099-INT, Schedule K-1 (Form 1041), Schedule K-1 (Form 1065), Schedule K-1 (Form 1120-S), or similar substitute statements.
3. Your total creditable foreign taxes aren't more than $300 ($600 if married filing a joint return).