TT is calculating my Foreign Tax Credit to be $0

Since there are no carryovers and assuming form 1040 line 16 has at least the amount of foreign tax paid, TT should have posted the foreign tax paid on line 20 as you qualify for the exemption. It appears TT does not see the foreign tax paid.

In Forms Mode, bring up the 1099-INT's. Make sure the foreign tax paid appears in box 6. If it is not there then type it in.
Also bring up form 1040 schedule B and verifiy that the income data from the interest payment is present.

Hi rogge1722,

Thank you for the pointers.

Form 1040 Line 16 has 0.

I do not have a tax liability other than Self-employment tax. Is this why I don't get the credit? Does the credit not apply against SE tax?

• Schedule B has the interest income, and 
• 1099-INT has the tax in box 6 and country in box 7

Your help is greatly appreciated.

Thanks

The 0 on Line 16 is, indeed, why you don't get the credit.  It doesn't apply to self-employment tax as it is only applies like-to-like on income.  

As line 16 of form 1040 is zero, the exemption cannot be used. It cannot be refunded but it can be carried over: otherwise it is lost.

If you choose to carry it over, 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 2024.

Thanks for the detailed explanation rogge1772. Your help is much appreciated.

Part III, line 20 is your taxes owed before the foreign tax credit. Since no taxes are owed, you cannot take the foreign tax credit this year. However, it may be available as a credit in future years against taxes owed.

@rogge1722  I had exactly the same FTC problem in preparing my 2023 return.   I had $56 in foreign taxes paid on foreign dividends,.  These foreign taxes and the related divs are on the uploaded 1099-DIV. 

Yet, the interview tells me:

------
You've met the requirements for taking the foreign tax credit without filling out Form 1116, but we don't see any foreign tax payments made (or there is no taxable income to apply the foreign tax credit against).

To enter foreign tax payments you must return to the income section of your return to enter foreign taxes paid on interest, dividends, or Schedule K-1 before you continue with the credit.
------

I then attempted to help the software by creating a Form 1116 (even though none is required).  That Form accepted the foreign tax amount and the related dividends, but does NOT generate or show an FTC.  I can't use the FTC for 2023, but expected to see it as a carryover into 2024.  Nope, not there. 

I have foreign taxes paid on divs every year, and 2023 is the first year I've had this problem.  Seems many have posted about it.  I've already filed my return, but would like to know how to make the program work correctly, as I don't want to lose the FTC carryovers.

Wondering if you can help?   

@BME , from your post it appears that TubroTax has not found the  foreign source income.  Generally 1099-DIV   does no include "foreign source income" just the foreign taxes paid.  You have to go through the back up pages  that came with the 1099-DIV  to find the  foreign source income -- sometimes it is shown exactly  and sometimes  ( if a mutual fund for example )  shown as a percentage.   TurboTax should have asked you for that info.

If you are using the on-line version then i lack knowledge of the screens -- I am familiar with the screens for  windows desktop.

@pk ... Thank you for your reply.  I use the Ttax desktop version, too.

Yes, I have the div amounts for which foreign tax was paid from the detail in my 1099-DIV. I entered those div amounts in the 1116 Comp Wks as follows: Part I, Col. A: Row g (Country) = "Various" ... Row c (Int & Divs from Sch B) = 1,337 (total from a supporting statement I entered with the components of such amount from my 1099-DIV detail).

The 1,337 div amount flowed to row g (Ordinary Inc) and row m (Adj Ord Inc) of the 1116 Comp Wks. Such income data then flowed to Form 1116, Pt. I, Col A(i) (Country) = "Various" and 1a (Gross inc from sources within the country) = 1,337. I would think that Turbo Tax could find the income as so entered.
 
In Form 1116 Pt II, Foreign Taxes Paid or Accrued, (j) "Paid" is checked, and the col. (l) shows "1099 taxes) and col (m)(Divs) = the 65 in foreign taxes paid.

For some reason, though, in Form 1116, ln 35, the amount of the calculated FTC is 0.  Although I can't utilize the credit in my 2023 taxable year, I don't understand why the program isn't generating a carryover to 2024.

I'd like to learn how to enter this such that the software works to show the FTC carryover, as I could save a copy of the file with that carryover (my tax for 2023 won't change).  If I can't learn how to do that, not sure what to do.  Perhaps just put in a note to self for 2024 to add the FTC credit carryover from 2023 if possible, perhaps through an override entry.  I generally don't like to do that, though, as I don't want to screw up my ability to e-file or mess anything else up.  Appreciate your thoughts.     

I too have already filed my 2023 returns without "recording" that I want to carry it forward. So now I am not sure if I have lost my ability to claim the carry-forward when I file TY2024 returns next year, or whether I can add the carry-forward manually next year.

@BME ,    First,  when you have  "Un-allowed" foreign tax credit computed on form 1116, TurboTax will ask if you want to carry any back and how much  ( if I remember right) , the rest would be left in the "Carry-Forward" bucket.  When you prepare  your   next  year return using Turbo, the carry forward amount is recognized  ( on federal carry over worksheet) and applied as foreign taxes paid.  You don't need to do anything special for this.

Second,  given the figures you quoted and unless you had  FTC carry-over,  your total foreign source  income of US$1337, could not have attracted  more  the safe harbor  amount of foreign taxes paid ( US$600 for MFJ).  Thus you should have been able to avoid  the form 1116 and its limitations .

I suspect the  zero allowable FTC is because of the ratio of  foreign income to world income is miniscule.

pk

@gmangesh  does my response above to @BME  cover  your situation or do you need more ?  If yes, please share some more details of your situation --- approx. or  stand in figures for  -- world income, foreign source income, Foreign Taxes paid on Foreign source , filing status  and if the FTC is from 1099-DIV -- please 

pk

@pk Thank you, I would have expected the program to behave just as you describe, but it didn't during my prep.  Not  sure why, or what to do about it going forward. 

I've done this foreign tax entry for years in Turbotax desktop ... even years when I was in a refund position and had an FTC carryover.  Still don't understand why Ttax failed to compute the FTC or its carryover.  To answer your points:

1.  Ttax never asked me if I wanted to carry over my FTC, as a carryback or a carryforward.  Perhaps because the program, erroneously as far as I can tell, computed the FTC to be 0.

2.  Agree that I should not have to use Form 1116 for the $56 of foreign tax I paid.  I only went down the Form 1116 rabbit hole because Ttax told me it did not "see" or recognize my foreign tax payment or the related div income.  I did my best to "reveal" those figures to the program, by manually entering them on Form 1116.  That did not work. 

3.  I get that my $56 in foreign taxes probably wouldn't generate an FTC when the regular "full blown" FTC limitation ratios of Form 1116 are applied -- I haven't delved into this part, as I should be in the Form 1116 exception safe harbor -- but I don't know how else other than on a Form 1116 to "reveal" the foreign taxes and related div income that the program kept telling me it could not see.  Perhaps by using Form 1116, I misled the program into concluding that I did not qualify for the "no Form 1116 needed" safe harbor?  No clue.    

Tell me, please, if possible:  Is there some OTHER way I should have entered the foreign taxes & related divs, such that the program would, in fact, "see" the pertinent figures, apply the pertinent safe harbor, and generate the correct FTC and related carryover?

Also, if this really is just a bug in the software, then, getting practical ... from a Ttax standpoint, how would you handle 2024 prep if you had to include an FTC carryover that the program missed in the prior year?    

Thanks so much.  

@pk thanks for offering to help. I am seeing TT behavior similar to what @BME has reported.

My situation:

1. I had about $350 foreign taxes paid that I reported on 1099-INT bank interest (though bank never sent an actual 1099-INT, that is how I reported it)

2. I am MFJ so TT told me I can claim $350 without needing 1116

3. However, for me, Form 1040 Line 16 has $0 since I do not have a tax liability. So then TT computed my FTC to be 0.

TT did NOT offer to carry-forward the $350 foreign interest to my 2024 return. At this point I have already filed my TY2023 returns without Form 1116 and with $0 in FTC.

So I have the same questions as @BME , viz.

-----

Tell me, please, if possible:  Is there some OTHER way I should have entered the foreign taxes & related interest, such that the program would, in fact, "see" the pertinent figures, apply the pertinent safe harbor, and generate the correct FTC and related carryover?

Also, if this really is just a bug in the software, then, getting practical ... from a Ttax standpoint, how would you handle 2024 prep if you had to include an FTC carryover that the program missed in the prior year?

-----

@gmangesh , @BME , IMHO, you two have similar predicament but the cause and hence the path forward may be totally different.  I hope I am interpreting this correctly  ( without having the total picture :(

@gmangesh , your issue i.e. not being able to use the  FTC  is because  the FTC is a NON-Refundable credit and thus  can ONLY reduce  your total tax liability up to zero.  So in your case because your  tax liability was already zero, FTC benefits are nil and lost.  The only corrective action here is to  refuse the  "simple method" of FTC and force the use of  form 1116.  This will recognize the whole credit  -- dollar for dollar.  But because  the allowable would be zero ( no tax liability without regard to  FTC ) , the whole amount would be available for carry back or carry forward.  Hopefully then you can use it in another year.

@BME , in your case because  from 1116   creates a very small ( rounded to zero )  FTC and assuming that  your tax liability is not zero, you can use the simplified method and force the system  to use the safe harbor process.  If that is not beneficial to you then you can always  ( because you are using  windows desk top version ) you can go to forms mode and  include the total FTC   ( over-ride ) on the federal  carry-over worksheet.  This should not affect your current return and be eligible for e-file.   Just make sure that next year when you prepare  your return  that the federal information  worksheet shows the carry-over information.

I hope this  helps .   Is there more I can do for you ?

pk

@pk Thank you very much for your help!  I saved a copy of my 2023 Ttax file just as a reference for my 2024 prep next year.  It has the Form 1116 Comp Wks and Form 1116 info that I added.  I also added via override the $65 in foreign taxes to the Carryover to 2024 section of Form 1116 Comp Wks.  (The Federal Carryover Worksheet doesn't include FTCs, at least in the one in my Ttax files doesn't.) 

This approach will at least help me remember to look at and consider the FTC carryforward in my 2024 prep, which will present a new environment for the FTC to be considered.  Maybe I will have to carry it forward again, or do some complicated limitation calculation, which will make the end result to be no FTC, but at least it won't be lost due to the apparent software bug.     

p.s.  I think my situation is like @gmangesh  's inasmuch as I also have a zero tax liability for 2023.  I see from IRS Pub 541, Foreign Tax Credit for Individuals, p. 18, that "If you make [the FTC safe harbor exemption election, such that no Form 1116 is needed], you cannot carry back or carry over any unused foreign tax to or from this tax year."  Thus, @gmangesh  you also may want to go the Form 1116 route.  

Hi @pk, thanks so much for your analysis. and thoughts.

@pk , @BME  - I have already filed my returns with the Safe Harbor election that TT chose for me - I did not override it and force the use of 1116. Which means I have now lost the chance to carry it forward and claim the FTC next year (unless I file an amendment, which is a hassle I will forego).

I would have expected TT to automatically fill out the necessary forms to carry it forward when it recognized that the FTC was being "lost" - or at least presented me with the option to either lose it or carry it forward. Am I expecting too much? Is there a way to report this behavior to TurboTax so perhaps they can improve TT's handling of this use case?

@gmangesh , @BME , I agree with you that TT could have done a better job, warning/ advising that  one  or the other path may be advisable ( but I suppose because of being  strict   only a preparation / transmittal service provider  there would be legal  exposure ) it does not  -- it leaves it up to the user of the product to try out different scenarios/ strategies to reduce  tax liability.

I don't what to say on this .

If tour query has been satisfied , please consider accepting the answer  ( so the  thread would close) and/or upvote ( since we volunteers  get satisfaction ONLY through these actions of the users ).

 Bahut Sukryia ji

pk

@pk & @gmangesh 

Like @gmangesh, after putting quite a bit of thought into this issue with the Ttax software, my question is:  "Is there a way to report this behavior to TurboTax so perhaps they can improve TT's handling of this use case?"

The software shouldn't be:

> telling users things like, it "can't see the income" without explaining why, and instructing exactly where to enter whatever it can't see but needs to see, especially when the foreign taxes have been uploaded on a 1099-DIV; if more detail about the related foreign income is needed, why not just ask for it?; 

The software shouldn't be:

> steering users to the FTC safe harbor, then dropping the topic with no explanation of why or what to do when the safe harbor doesn't generate an FTC that can be utilized in the tax year.

The software shouldn't be:

> skipping the Form 1116 track entirely, such that users are left to override a bunch of erroneous "zeroes"  to even get the software to report the actual carryover amount. 

I don't think improving the software's FTC flow such that it generates correct carryover amounts in all cases is "offering tax advice."  I know I only came here for help because the program was asking for info it already had, and providing incorrect results.  I had no idea how to make it "see" what it said was missing.  To me, the flow should be:  Does the safe harbor apply, if yes, great.  If not, fine, go ahead with the key Form 1116 questions ... wouldn't take long to determine whether any of the FTC may be used in the tax year, and the rest should carry over.   

Everyone has to decide for themselves what to do, practically, but I do not plan to amend my 2023 return either, as there is no change in 2023 tax.  I also plan to add my FTC carryover as an override to my 2024 prep next year, with a brief supporting statement of how it arose and could not be used in 2023.  I think that is reasonable, and I'll keep a copy of this discussion in my file in case anyone might think it is not.

Also, I believe the safe harbor is there to allow the FTC in modest amounts in the current year, without a bunch of Form 1116 complexity, so long as the FTC can be used in that year.  I don't think it's supposed to deprive anyone of a carryover if it actually doesn't apply. 

Thank you both for an interesting and informative discussion!  

@BME , @gmangesh ,  I will forward this thread to  the mods of the volunteer group so  the powers-be are aware of your thoughts.

I think I have  done all I can to help you.

pk

I had the same issue about a week ago, also with a MAC.     The  online chat help could not solve it after patiently spending a lot of time.  He suggested that I try the next day.  We did see the screen option for Turbo to calculate the most advantageous method for me, and to compare both, but it just kept giving 0 as a foreign tax credit.  I wonder if this is a bug in the software ?

I tried again, and another online chat person told me to fill in the itemised rather than standard deduction.  This worked, but  after printing all my forms (closing the ticket) and sending them to the IRS with the money  I realised that it did not print out the 1116 form to apply the foreign  tax the credit that I could carry forward..   My case is fairly simple as the tax treaty is only one way, I now have to amend my tax return.

I suggest reading the booklet on foreign tax credit and instructions for form 1116 several times to be prepared because the online chat people are not specialists in this, although very kind and patient.  It helps to manually complete the relevant forms to learn more about it, but I am a bit disappointed that I spent several hours on this for no reason.

Hi @CM47  Welcome to the FTC Carryover Glitches Club. 

Seems you got your carryover to show up without overrides, good for you!   Not sure why using itemized deductions v. the standard deduction resolved the erroneous "zero FTC" errors for you, but interesting that it somehow did. 

So frustrating that, in selecting the forms to file with your return, the software omitted your Form 1116 & 1116 worksheet that shows the carryover.  Uggh.  Why is it that we notice that kind of thing AFTER hitting the proverbial send button?            

Hi. I have a similar problem.  I have a value larger than the FTC  on line 16. TT tells me that I have recorded $X of FTC but when I finished all the steps and looked at the final form 1040, the FTC line 20 has no value.  Also given that all my FTC was paid on dividend income, form 1116 is not required.  So why does the FT that I paid not sure up as FTC?  How can I see if I picked deductions or credit for the FTC section?  I would like to make sure that I pick credit since it gives dollar for dollar deduction. 

@pk i am hoping that you can give some advice as to how to get the FTC to show up in my form 1040.  I am using TT to check against my tax accountant to see how good TT is.  All the numbers match up +\-$5 except for the FTC.  My accountant has the full FTC deducted dollar for dollar on my 1040 while the final TT 1040 has my FTC at zero even though in the interview process it confirmed the correct total FTC number as my accountant.  TT just did not carry that FTC number into my 1040 resulting in no tax credit at all.  
I have a value larger than the FTC  on line 16. TT tells me that I have recorded $X of FTC but when I finished all the steps and looked at the final form 1040, the FTC line 20 has no value.  Also given that all my FTC was paid on dividend income, form 1116 is not required.  So why does the FT that I paid not sure up as FTC?  How can I see if I picked deductions or credit for the FTC section?  I would like to make sure that I pick credit since it gives dollar for dollar deduction. 

also I am using a desktop version of Deluxe 2023 on a Mac.