Foreign Taxes Paid Form 1116 Not Working

[rfisher71]

I am using TurboTax Premier. I have ten countries which withheld taxes on dividends. I am trying to get the tax credit. I am having trouble filling out the questionnaire. 

1) At the page titled "Where Did You Receive Dividend Income From?", it states to select all countries to which I have paid taxes. I then select all ten countries and click "continue".

2) At the page titled "Income from Foreign Countries" it lists the ten countries. I select the first country and click "report income". 

3) At the page titled "Report Foreign Tax Paid to <country>" I select the appropriate 1099s and click "continue". 

4) At the page titled "Foreign-Source Income" I enter the correct amount and click "continue".

5) At the page titled "Reporting Foreign Taxes Paid" it states "You have completed reporting all copies of Form 1099-DIV to a country". "Do you want to review your entries?" "Note: If you answer 'yes' then you must repeat the process and report all copies of 1099-DIV again". 

If I click on "no" it goes to a page titled "Simplified Limitation Election for AMT". The page states "We've reported your interest, dividends, and Schedule K-1 from each country." It goes on to state other things but it acts as if I am complete when I have only filled out one country.

If I click on "yes" it goes back to the page titled "Where Did You Receive Dividend Income From"? All the countries that I entered previously are gone except the first country which I have reported income. I enter the second country (again), click "continue" and go to the page titled "Income from Foreign Countries". I select the second country and click "Report Income". I go to the page titled "Report Foreign Tax Paid to <country>" I select the appropriate 1099s and click "continue". I go to the page titled "Foreign-Source Income" I enter the correct amount and click "continue". I go to the page titled "Reporting Foreign Taxes Paid" it states "You have completed reporting all copies of Form 1099-DIV to a country". "Do you want to review your entries?" "Note: If you answer 'yes' then you must repeat the process and report all copies of 1099-DIV again". I click on "yes". I go back to the page titled "Where Did You Receive Dividend Income From"? The first country that I entered previously is gone and only the second country which I have reported income is left.

So no matter whether I enter "yes" or "no" in Step 5 above the program doesn't work. Has anyone been successful with this?

[AmyC]

If this is from a mutual fund, you should select RIC (Regulated Investment Company) instead of picking a country. Since this is passive income, another option for non-mutual funds, is to select Various for the country and enter totals.

[rfisher71]

It isn't a mutual fund or an RIC. This is from individual stocks that I own. You can't enter various and enter totals if you have more than $600 in dividends. Once you breach the $600 limit the IRS wants the data broken down by country.

[rogge1722]

TT can support only one country per 1099.  Here is a suggested workaround .

This is an example of the preparation to fill out a form 1116 for taxes paid by 3 countries within a 1099-DIV.

They are:

 a: RIC which includes all mutual funds/ETF”s

b: Canada

c: United Kingdom

Three fictitious 1099-DIV’s will be created.  The original 1099-DIV will be used for domestic income only.

Bring up a new blank 1099-DIV.  For convenience name the payer the same as the country it represents. In this case the payer is RIC.  From the broker’s supplemental info, insert into box 1a the ordinary dividends from any and all mutual funds/ETF’s.  In box 1b, insert all qualified dividends from all mutual funds/ETF’s.  In box 7, insert the foreign tax paid from all mutual funds/ETF’s.  That completes the 1st fictitious 1099-DIV.

Bring up a 2nd blank 1099-DIV.  Name the payer Canada.  In box 1a, insert all the ordinary dividends from Canada; in box 1b all the qualified dividends from Canada and in box 7 the tax paid to Canada. That completes the 2nd fictitious 1099-DIV.

Bring up a 3rd blank 1099-DIV.  Name the payer U.K. In box 1a, insert all the ordinary dividends from the U.K.; in box 1b all the qualified dividends from the U.K.  The U.K. does not withhold taxes, but TT must see an amount in box 7 during the interview.  Insert $1.00 into box 7 and subtract $1.00 from box 7 from either of the previous fictitious 1099’s.  That completes the 3rd fictitious 1099-DIV.

On the original 1099-DIV, subtract all the foreign amounts from box 1a so that only the domestic ordinary dividends remain. Subtract all foreign amounts from box 1b so that only the domestic qualified dividends remain. Delete the amount in box 7, the foreign tax paid.

If there are more than 3 countries, TT will automatically generate additional F1116 copies as necessary

If there are more than 6 countries, the screen with the header “Report foreign tax paid to XXX” will only display up to 6 payers. Additional payers are on the following screen.

User has multiple 1099’s and multiple countries. 

You have 2 1099’s and 4 countries.  TT can support only one country per 1099-DIV.  You will need 4 1099’s, 2 actual and 2 fictitious.  Select one of the actual 1099’s and dedicate it to one country.  In box 7 insert only the tax paid to that county.  Do the same for the 2nd country. 

Bring up a blank 1099-DIV. For convenience, name the payer the same as the country it represents.  Insert the amount of the ordinary dividends in box 1a, the qualified   dividends in box 1b and the tax in box 7. Subtract these amounts from the actual 1099-DIV.  Do the same for the remaining  country. 

When done you have 4 1099’s; each one representing one country.  When you go the interview, you will insert all 4 countries from a dropdown box; then TT will ask you to select one at a time to insert the foreign ordinary dividends; then circle back to the next country etc.

The issue of the largest tax paid  being  used on copy1 does not apply here as you are only using passive category of income.  Copy 1 will have parts 1 thru 4 filled out and copy 2 will only have part 1 and 2 filled.

[rfisher71]

Well thanks for your answer. It is very weird that TT would only support one country per 1099 because it allows me to enter all ten countries in the one screen. 

Will the fictitious 1099-DIVs cause a problem with IRS acceptance or increase the chance of an audit?

I had one other suggestion of entering the information manually into the Form 1116 which was made in response to a reply that I made in someone else's post on Form 1116. https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-foreign-dividends-are-not-sep...

[rogge1722]

There should be no audit provided the amounts are correct. I've used this procedure for years with no problems.

Entering data directly into form 1116 worksheet is fine provided that the user has a reasonably good level of expertise because of the fact that there is no guidance as in the step-by-step procedure.

[rfisher71]

OK. Thanks again for the input. I have actually gone through the arduous effort of submitting this problem as a ticket through customer service. We will see if they fix this problem. 

I have submitted the problem of HSA distributions automatically being assumed to have paid medical expenses for the tax year in which they are taken five years in a row and they still haven't fixed it. There really isn't a work around for that problem if you live in California.

[rfisher71]

I was going to start to use your method but I decided to do a little more research on this problem on the web. I eventually found this article, https://thefinancebuff.com/foreign-tax-credit-form-1116-turbotax.html/comment-page-2#comment-37902

In reading the article I came across this TT screen:

So I went through the process again, just adding my first country and going through all the step by step questions until I got to the above screen. Then I added each country one at a time. After the third country it adds another 1116 form and likewise after the sixth and the ninth. It appears to have populated all of the forms and schedule B correctly and calculated my tax credit and my carryover. But I haven't checked it in detail. I will do that soon. If this method actually works correctly all that TT needs to do is change the poor wording on the step by step instructions to let people know to add the first country, complete all of the steps as if that was the only country, and then add all remaining countries at the "country summary". It saves having to create fictitious 1099-DIVs and a bunch of other contortions.