foreign tax credit - warning on not able to file electronically

[hedgie]

Foreign tax credit is my pain point every year.  Last year, I learned how to create dummy 1099Rs for multiple countries ( RIC + 3 countries) to get the data in.  Fine.  This year I have RIC + the same 3 countries.  This creates 2 copies of the computation sheet -  RIC + 2 countries in one, the last country in the other.  But...this year I get the following message:

We noticed that copy 2 of your foreign tax computation worksheets also reports Passive income.  You have room on that worksheet for another country.

You can continue with this worksheet, but YOU WON'T BE ABLE TO FILE YOUR RETURN ELECTRONICALLY IF YOU HAVE MULTIPLE WORKSHEETS FOR THE SAME INCOME CLASS. (my emphasis added)

What gives, this year's inputs are just like last years as far as all are for passive incomes, same countries, and it filed fine.

[DaveF1006]

 To clarify, are your forms 1099R's or 1099 DIV's? The reason I ask is that it's extremely rare for a RIC to issue a 1099R.

[hedgie]

Yes, I meant 1099DIVs...sorry got a little punchy after fighting with taxes most of yesterday, then fighting to find where to post the question.

[DaveF1006]

The IRS only allows one Form 1116 for each income category, like Passive or General. If you enter "RIC" along with three specific countries, TurboTax uses more columns than a single form can hold and moves the extra information to a second Form 1116 worksheet.

The IRS prohibits efiling if more than one worksheet is used for the same category of income. To alleviate this problem, we can consolidate the information into one worksheet, which is permitted by the IRS. Before we begin consolidating, you need to delete all Forms 1116 and worksheets and start fresh.

If you are on Desktop (Recommended):

1. Go to Forms Mode (top right). 
2. Find Form 1116  and the Foreign Tax Credit Comp Wks  
3. Delete these specific worksheets using the "Delete Form" button at the bottom.

If you are Online:

1. Go to Tax Tools > Tools > Delete a form. 
2. Delete every Form 1116 and every Foreign Tax Credit worksheet. 

 Now go back to your original 1099 DIV entry point and select edit next to the DIV reporting the foreign dividend. As you navigate, go to the section that is labeled Tell us about your Foreign Dividends. Record all your dividends are RIC.

1. The IRS explicitly allows you to use "RIC" as the country name for mutual funds or ETFs that pay foreign taxes. 
2. Instead of creating dummy 1099s for each specific country, combine the total foreign tax and total foreign income from all your 1099-DIVs into one entry and select "RIC" from the country dropdown.  
3. Result: This keeps all data on one single Form 1116, column A, and eliminates the second worksheet entirely.

If you have individual stocks (not just mutual funds) and want to be precise:

1. Use the term "Various" as the country name for the smaller entries. 
2. Combine those into a single column.

Note: The IRS has become stricter about "Various," but it is still technically allowed for passive dividend income. However, using "RIC" is generally more successful for e-filing.

Now revisit the Foreign Tax credit section. Go to Federal > Deductions & Credits>Go to Estimates and Other Taxes Paid>Click Start (or Revisit) next to Foreign Tax Credit. Scroll though the interview until you get to the question Tell Us About Your Foreign Taxes," select Yes to the question: "Does your total taxes paid only include taxes reported on a Form 1099-INT or Form 1099-DIV?" 

• Next, you will be asked to select a Category of Income. Select Passive income.
• On the Country Summary screen, click Add a Country.
• In the dropdown menu, select RIC 
• TurboTax will show you a list of your 1099-DIVs. Check the box next to the 1099-DIV that you just edited.
• Next will will be a button that says report income. You will select that button.
• Now the reporting should be complete at this point since you entered the foreign sourced income and the tax paid when you entered the 1099 DIV.

Now finish out the Form 1116 by pressing continue until you are done with the interview.