When I enter multiple foreign countries for foreign tax credit, TT then only allows me to enter income for one country, not all. Am I missing something?

[kscordes]

This is for passive dividend income.

[rogge1722]

A significant shortcoming of TT is that if you have to fill out Form 1116, it can support only one country per Payer.  In the past, if there were more countries than Payers, using “Various” was the technique used to restore the 1 to 1 country/payer ratio. The following technique restores this 1 to 1 ratio by creating additional payers to equal the number of countries.

This addresses the issue of a 1099-DIV with Box 7 showing foreign tax paid to multiple foreign countries and it is necessary to identify and list the countries individually on Form 1116. This is done by utilizing Dummy 1099-DIV's as illustrated by the following example.

We have a 1099-DIV with Box 7 displaying the total tax paid to 3 foreign countries we will call “A”, “B”, and “C”.

Navigate to the “Here’s the dividend info we have so far” screen displaying the name of the Payer. This will be our Main Screen.  Bring the Payer up in EDIT mode.  Change Box 7 to the amount paid to  “A”.  Click “Continue “.  Either the Main Screen will appear or 2 consecutive screens asking for dividends paid and the source country.  If the latter occurs, insert the data for  “A”, then continue to the Main Screen.

Click on the New Payer button.  We will name this Payer “Dummy1”.  In Box 1a, put a zero.  This prevents TT from issuing an error. In Box 7, enter the tax paid to “B”.  Leave the remaining boxes blank. Click “Continue” back to the Main Screen.

Again open up a New Payer.  We will name this “Dummy2”.  Put a zero In Box 1a and in Box 7 the tax paid to “C”.  Click  “Continue” back to the Main Screen.

Now when we go to the Foreign Tax Credit Interview Section, we are positioned to enter all the necessary data for each country individually.

Now we consider countries “D”, “E”, “F” etc.  
When multiple copies of form 1116 are needed, they have to be created in the right order.
Using TT’s special instructions as a guideline, the following strategy is suggested. Assign to “A” the largest tax paid, then to “B” the 2nd largest and so on through to “F”.  Then when we enter the Foreign Tax Credit Interview Section, we run them through in the same order; greatest to the least.

You may find on part 2 of Form 1116, it is necessary to type in the date for the fictitious Payers which will be the same as the actual Payer, usually 12/31/2018..
Due to recent changes, false errors may appear on the f1116 wks. in part 1, lines 1h, 1i, and 1j. Override them with zeroes to clear the error.

[Refox]

Thanks for info. This is a serious flaw in Turbotax. 

This is especially common for investments. The brokerage 1099 will list foreign taxes from multiple countries on a single 1099. Turbotax should allow multiple 1116s from a single 1099 that has multiple country taxes paid. It is really unacceptable that it requires such a convoluted work around such as creating multiple fake dummy 1099 payors to overcome this Turbotax deficiency. I hope Turbotax fixes this software flaw. 

[Shaverma]

Thank you for the solution, however...

Using TT Premier Desktop, I entered “dummy” dividend payers, per your solution. However, when I went back to the Foreign Tax Credit interview, those dummy payers did not show up.  Is it because they have zero dividend income?

[rogge1722]

They should have been seen.  However, the TT software dept. incorporated a new feature starting in TY2016 for adjustments. This has caused false errors to occur in the f1116 comp. wks. in part 1 (1i) for section 1250 gains and (1j) collectables. So the technique had to be changed with regard to the 1099-div box 1a for the actual and fictitious payers.

You should be able to update the 1099's in Forms mode but I suggest deleting any f1116's and worksheets before revisiting the FTC interview.

Here is the updated technique.

A significant shortcoming of TT is that if you have to fill out Form 1116, it can support only one country per Payer. In the past, if there were more countries than Payers, using “Various” was the technique used to restore the 1 to 1 country/payer ratio. The following technique restores this 1 to 1 ratio by creating additional payers to equal the number of countries.

This addresses the issue of a 1099-DIV with Box 7 showing foreign tax paid to multiple foreign countries and it is necessary to identify and list the countries individually on Form 1116. This is done by utilizing Dummy 1099-DIV's as illustrated by the following example.

We have a 1099-DIV with Box 7 displaying the total tax paid to 3 foreign countries we will call “A”, “B”, and “C”.

From the broker’s supplemental information, extract the foreign-source income amount in box 1a from “B” and “C” and combine them. .

Navigate to the “Here’s the dividend info we have so far” screen displaying the name of the Payer. This will be our Main Screen. Bring the Payer up in EDIT mode. Subtract the sum of B and C from the amount in box 1a and insert the remainder into box 1a. In box 7, replace the amount with the foreign tax paid to country “A”. Click to return to the Main Screen.

Click on the New Payer button. We will name this Payer “Dummy1”. In Box 1a, insert the foreign income from country “B”.. In Box 7, enter the tax paid to “B”. Leave the remaining boxes blank. Click “Continue” back to the Main Screen.

Again open up a New Payer. We will name this “Dummy2”. In box 1a, Insert the foreign income from “C”. In Box 7 the tax paid to “C”. Leave the remaining boxes blank. Click “Continue” back to the Main Screen.

Now when we go to the Foreign Tax Credit Interview Section, we are positioned to enter all the necessary data for each country individually.

Now we consider countries “D”, “E”, “F” etc.
When multiple copies of form 1116 are needed, they have to be created in the right order.
Using TT’s special instructions as a guideline, the following strategy is suggested. Assign to “A” the largest tax paid, then to “B” the 2nd largest and so on through to “F”. Then when we enter the Foreign Tax Credit Interview Section, we run them through in the same order; greatest to the least.

You may find on part 2 of Form 1116, it is necessary to type in the date for the fictitious Payers which will be the same as the actual Payer, usually 12/31/2019..

[mnothstein]

Not only do I have 1 payer with 8 countries plus 1 mutual fund that I used various for, but I have 2 1099 from the same payer (Different brokerage accounts, same brokerage) and the second one has 2 countries, matching 2 of the first 1099.  Any suggestions on how I handle that? 

[DaveF1006]

 What form is the payer that has 8 countries reported on? Is it a 1099B?

[rogge1722]

Here is a suggested technique to enter the data for foreign tax credit.

There are 9 distinct countries. The mutual fund country is “RIC”; (regulated investment company).  Each country will occupy 1 column in form 1116.

The arrangement is to create 9 fictitious 1099-DIV’s, each one representing one distinct country.  The 2 main 1099-DIV’s will end up serving only U.S. sources.

Preparation:

I suggest getting the data ready on a spreadsheet.  To begin with, for reference, record the amount on both 1099’s boxes 1a, 1b and box 7.  Also the amount in schedule B, line 6. 

On the spreadsheet, dedicate one column for each country.

Let’s assume that column A is for Canada.  From the broker’s supplemental info, insert the ordinary dividends. If Canada should be on both 1099’s, enter them separately then add them up.  Do the same for all qualified dividends and taxes paid.  These amounts must then be subtracted from the respective 1099’s so that the totals remain constant. 

In column B, repeat the same format for the country it represents. Continue on with column C, etc. to the end.

The subtractions can be done piecemeal or any way you like, taking care that it is accurate.  When you are done, the main 1099’s will display only the U.S. amounts in box 1a and box 1b and make sure the box 7's are empty.

Now bring up a blank 1099-DIV.  For clarity and convenience, name the payer “Canada.” Fill in box 1a, 1b, and box 7 the data from the spreadsheet for Canada.  Repeat this format for the remaining 8 countries.

You are now ready to enter the foreign tax credit interview. As they are all passive category, they can be entered without regard to the amount of foreign tax paid as prior postings stated.  However, if there is any general category income, that would be an issue.  I’ll assume that’s not the case.

During the interview, you will come across a screen header “Report Foreign Tax Paid to (Country).  Underneath is “select” and “Dividends paid by”.  This screen can display only about 6 payers at a time.  The remaining payers are on a succeeding screen.  Also you may be asked to submit the date paid for each country. Use 12/31/2020.

[Anonymous]

You're overthinking it.   It isn't necessary to list every country.  Combine them and use "various" or name the largest of them.

It only matters if you have income or taxes to pay from sanctioned countries that don't qualify for the credit (such as Cuba) you can simply list various and no one at the IRS is going to come running after you. 

Keep your detailed records in case they ever ask (which is highly unlikely because doing so will not produce any additional revenue) and just combine them and save yourself the headache.  

[Shaverma]

The "Dummy" payers technique fixes the Form 1116s.  But it introduces a little goodie that may or may not be a problem itself.  On Schedule B, the dummy payers are now listed as Payers in Part II - Ordinary Dividends.  The numbers are correct, but will IRS choke on the fake payer names?

Thanks for a very good work-around.

[Anonymous]

No, the IRS doesn't check on payers names.  Not unless you are sitting across the table from them in a full blown end to end audit which would mean you have way bigger problems (and is exceptionally rare anyway). 

The IRS doesn't have to know all 9 or whatever of these countries.  Various is a perfectly acceptable answer.  There is no need to make it harder on yourself.  

[rogge1722]

From the IRS's (2020 Instructions for Form 1116:(

Line i—Foreign Country or U.S. Possession

Generally, if you received income from, or paid taxes to, more than one foreign country or U.S. possession, report information on a country-by-country basis on Form 1116, Parts I and II. Use a separate column in Part I and a separate line in Part II for each country or possession. If you paid taxes to more than three countries or possessions, attach additional sheets following the format of Parts I and II.

That does not appear that using VARIOUS  or  only listing sanctioned countries by name complies with the instructions.

[ReneeM7122]

You may write VARIOUS because it is the only way to efile the return.  If the IRS comes back with a question, you can easily show them all the documents that you have and there will be no issue with the correctness of the information that you reported on your tax return. 

@rogge1722

[mnothstein]

Yes 1099B. Consolidated tax reporting statement details. (Don't see any thumb icon, or where to mark as best answer (NB here)

[mnothstein]

I did put together a spreadsheet, had some difficulty getting the numbers right. Tax totals are good, but 1a totals is not.  Now I have a different problem, qualified dividends box 1b is now greater than total dividends in box 1a of the new one (new99804)

	A	B	C		D	E	F		G	H
	99804	new99804	99804dummy1	99804dummy2		99804dummy3	99804dummy4	99804dummy5	99804dummy6
1a	$16,602.52	$14,916.62	$1,067.92	$617.98		$365.48	$105.06	$47.47	$118.35	$17,238.88	TOTAL
7	$660.83	$223.65	$136.71	$160.90		$98.68	$22.06	$7.13	$11.70	$660.83	TOTAL