What portion of my dividends and distributions came from a foreign country?

[pemfir]

The question asks, from the total distributions in 1099-DIV (total capital gains + ordinary dividends) how much was from foreign investment. However, in the box where I need to enter the number it says enter "foreign dividends received". So which one is it asking for (1) only foreign dividends or (2) foreign dividends  + foreign short term cap gain or (3) foreign dividends +  foreign short/long term cap gain ?

[FangxiaL]

The composite1099 forms from your brokerage list the detailed information about the dividend income. When and where it came from, the amount of foreign tax paid, etc. Look through the pages you will see the dollar amount of total dividends, qualified dividends, or if there is any capital gain. Whichever one of the choices applies to you depends on what portfolio you have.  

[pemfir]

Turbo tax is asking this question because 1099 DIV box 7, is showing I paid $10 in foreign taxes. The detailed description shows:

======DIVIDENDS, QUALIFIED, 199A AND 897 DISTRIBUTIONS non-classified securities

foreign dividend    $X

foreign short term capital gain $X

foreign tax paid $10

======DIVIDENDS AND DISTRIBUTIONS non-classified securities

foreign long term capital gain $X

foreign tax paid  $0

which of the three foreign distributions do you recommend i should include as dividends and distributions that came from a foreign country? all three of them or the ones grouped with the $10 foreign tax that appears in box 7?

[ThomasM125]

One would assume that all three income items would be taxable. So, it would be reasonable to add the dividends, short and long term capital gains together to arrive at the foreign income associated with the foreign tax. As a practical matter, it probably won't make a difference since you will get a full credit for the foreign tax if the total is less than $300 for a single filer or $600 for married filing joint.

[frustrated1098]

My brokerage sent me a 1099-DIV that  tells me on line 7 the foreign tax paid and on line 8 that it was paid from various foreign countries. But where does it tell me how much or what percentage of my income was from foreign sources. How am I supposed to find that out so I can deduct the foreign taxes paid, or is that just a question Turbotax asks that does not actually need to be reported in order to take the deduction?

[MarilynG1]

You should have supplemental info with your 1099-Div telling you the amount of foreign income related to the Foreign Tax you paid.  If you can't find it, you may need to contact your broker.  There may be an online report you can access.

Once you have determined the amount of Foreign Income, when reporting Foreign Tax use 'RIC' as the Country. 

@frustrated1098 

[Quid]

Perhaps too late to help you for 2022 tax year, but not if you filed an extension. Hopefully this might help others in the future. BTW, I am not a CPA or tax advisor. Just passing on what I have read.

I was in the same predicament as you have with TurboTax, but for more than $10 foreign tax paid. The tax was exactly 10% of the total dividend. 

A couple things: 1) how much time do you want to spend on reducing your taxes by $10?

2) TurboTax implies you must complete Form 1116, which is not always correct, as it appears in your case.

Check out:

Re: 1099-Div Box 8 (intuit.com) https://ttlc.intuit.com/community/taxes/discussion/re-1099-div-box-8/01/2306349/highlight/true#M8284...

and the IRS official information on foreign tax credits:

https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-how-to-figure-the-credit

Bottom Line in your situation, since the foreign taxes paid are less than $300 USD is to just skip over TurboTax's advice to complete Form 1116 and guess what happens then? TurboTax still records what you entered for the Takeda 1099-DIV in Box 7 and presumably reduces taxes by the same amount. I didn't experiment with entering different amounts for Box 7, but easy enough to do to see if and how TurboTax recalculates taxes due. Should be a 1:1 match for Japan, i.e. your taxes due should be reduced by $10 in your case.

[DawnC · Accepted solution]

You will not be subject to the foreign tax credit limit and will be able to claim the foreign tax credit without using Form 1116 if the following requirements are met.

1. Your only foreign source gross income for the tax year is passive income, as defined in Publication 514 under Separate Limit Income.
2. Your qualified foreign taxes for the tax year are not more than $300 ($600 if filing a joint return).
3. All of your gross foreign income and the foreign taxes are reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT).
4. You elect this procedure for the tax year.

If you make this election, you cannot carry back or carry over any unused foreign tax to or from this tax year.

Caution! This election exempts you only from the limit figured on Form 1116, not from the other requirements described in Publication 514. For example, the election does not exempt you from the requirement that the foreign tax be a nonrefundable income tax.

For further details on computing the foreign tax credit refer to Publication 514, Foreign Tax Credit for Individuals