Foreign Tax Credit Form 1116

[Trekker1]

Have TT Premier, Joint Return, Standard Deduction, only have Foreign Taxes reported on 1099-DIVs, total amount is a little over $600.  Since it's over $600 I'm suppose to fill out form 1116.  Do not want to fill out form 1116.  Can I change the amount on the 1099-DIV to less than $600 so I don't have to fill out form 1116 and still get some credit? Or can I change the 1099-DIVs foreign taxes to 0, therefore no form to be generated and no credit? Or do I report the Foreign Taxes on the 1099-DIVs and answer in the Foreign Tax Paid Section to use the tax as an itemized deduction, therefore, since I'm taking the Standard Deduction it has no effect and would get no credit.? Which is the best way to do it?

[ThomasM125]

The best thing to do would be to complete the Form 1116 section and take the credit that way. The IRS prohibits you from taking the credit without filing Form 1116 if your foreign taxes are over $600 and one would assume this would apply whether you report them as such or not.  Also, if you enter your 1099 form incorrectly in TurboTax it may invalidate your accuracy guarantee from TurboTax. You wouldn't need to reduce the reporting on Form 1099-DIV to $0 if you didn't want to take the credit, as you won't get it if you report over $600 on the 1099 form and don't complete the Form 1116. The itemized deduction options won't help you on your federal return since you taking the standard deduction.

Here are steps to complete Form 1116 if you choose to do so:

First, you enter the Form 1099-DIV. Then go to the Estimates and Other Taxes paid section in  the Deductions and Credits area of TurboTax to enter your foreign income, choose Foreign Taxes.

If your only foreign taxes were reported on your 1099-DIV or 1099-INT or similar statements, choose that option on the screen that says "Tell us About Your Foreign Taxes:

Indicate that you need to complete Form 1116 when asked. It's usually better to take the foreign "Credit" option over the "Deduction." Choose the countries you paid the taxes to:

Then report the income by country:

[Trekker1]

I do not get the second screen shot that says Tells Us About Your Foreign Taxes.  I get the following screens after choosing Foreign Taxes:

I don't see an option to not fill out the form.  At this point the choice is Itemized Deduction or Take a Credit.  If I take the Itemized Deduction my credit will be zero, because I take the standard deduction.  I do not want the credit and do not see an option of not filling out Form 1116.  Where is the option of not filling out the form?

Thanks.

[AmyC]

If you want to reduce the amount of foreign tax paid on your 1099-DIV entry, you can reduce it to $300 or $600 MFJ (or less) and not worry about the form 1116. For a few dollars, changing the DIV is easier 🙂

If you want to keep going and choose credit, you can.

[Trekker1]

Per ThomasM125  Employee Tax Expert above, that may invalidate the accuracy guarantee from TT.

[Trekker1]

Still confused as to what to do if I don't want the credit.

[AmyC]

If you want an accurate return, you would file the 1116. If you don't want the credit, take it as a deduction and it will zero out since you are taking the standard deduction. If you do want the credit, choose credit. It is your choice. Is there a reason you don't want a credit?

[Trekker1]

One reason for not wanting the credit is Form 1116 is very complicated and it may not be worth the trouble.  Such as, if you don't list the countries in decending order of tax amount paid you will get an error message, which Turbotax explains on one of their dropdowns, and not be able to e-file.  When you have more than one account making up the credit you need to combine data and this becomes time consuming. Also there are  questions that are not clear how you should answer.  I did try to go through and answer the many questions and still had errors, which I figured out how to correct.  Sometimes taking a credit is not worth all the effort.  Thanks.

[MarilynG1]

For a 1099-Div with Foreign Tax, you don't need to list all the countries.  Just choose 'RIC' as the country (Regulated Investment Company) and enter total amount of Foreign Tax/Foreign Income.

It's actually very easy; you had only a couple more screens to go from the screenshots you sent earlier.

Say Yes, you want to review entries.

Choose RIC on next screen, checkbox for dividends, enter Foreign Source Income Amount.

Review Entries, No.

Here's more info on Claiming the Foreign Tax Credit. 

@Trekker1