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SandyG19
Level 2

Form 1116 not showing correct amount on line 1

Linked all investment dividends to 1116-- $5127 with foreign taxes paid $769 - 15 %

According to the IRS--

  • Generally, if the foreign sourced income was taxed at the 15% rate, then you must multiply that foreign sourced income by 0.4054 and include only that amount in your foreign source income on Form 1116, line 1a

So, I was expecting to adjust the amount -->$2078- ( 5,127 x 0.4054)

But the form 1116 shows $5127  on line 1.  Or ZERO when the box on "Foreign Qualified Dividends and/or Capital Gains Adjustment Smart Worksheet -- Check the box to make adjustments for foreign qualified dividends and/or capital gains for line 1" is checked.  I can only see this using forms view.  

TT did not click on the box.  I had to manually do it. 

 

Am I missing something?

 

Using Turbo Tax Deluxe

 

1 Best answer

Accepted Solutions
Mike9241
Level 15

Form 1116 not showing correct amount on line 1

perhaps you meet the adjustment exception

Adjustment exception for Form 1040 or 1040-SR filers. You qualify for the adjustment exception if you meet
both of the following requirements. 

1. Line 5 of the Qualified Dividends and Capital Gain Tax Worksheet doesn't exceed:
a. $326,600 if married filing jointly or qualifying widow(er),
b. $163,300 if married filing separately,
c. $163,300 if single, or 
d. $163,300 if head of household.
2. The amount of your foreign source capital gain distributions, plus the amount of your foreign source
qualified dividends, is less than $20,000. For this purpose, ignore any capital gain distributions or qualified
dividends you elected to include on Form 4952, line 4g.

 

 

if not, i don't think it's capable of doing the calculation. Your calculation may not comply with the law.

How to make adjustments - line 1a. To adjust your foreign source qualified dividends
or capital gain distributions, multiply your foreign source qualified dividends or capital gain distributions in each separate category

by 0.4054 for the foreign source qualified dividends or capital gain distributions taxed at a rate of 15%,

by 0.5405 for those taxed at a 20% rate. 

include the total on line 1a of the applicable Form 1116.
for those taxed at 0%  exclude them from line 1a

 

this can result in a substantial FTC carryover that may never be used.

 

View solution in original post

6 Replies
Mike9241
Level 15

Form 1116 not showing correct amount on line 1

perhaps you meet the adjustment exception

Adjustment exception for Form 1040 or 1040-SR filers. You qualify for the adjustment exception if you meet
both of the following requirements. 

1. Line 5 of the Qualified Dividends and Capital Gain Tax Worksheet doesn't exceed:
a. $326,600 if married filing jointly or qualifying widow(er),
b. $163,300 if married filing separately,
c. $163,300 if single, or 
d. $163,300 if head of household.
2. The amount of your foreign source capital gain distributions, plus the amount of your foreign source
qualified dividends, is less than $20,000. For this purpose, ignore any capital gain distributions or qualified
dividends you elected to include on Form 4952, line 4g.

 

 

if not, i don't think it's capable of doing the calculation. Your calculation may not comply with the law.

How to make adjustments - line 1a. To adjust your foreign source qualified dividends
or capital gain distributions, multiply your foreign source qualified dividends or capital gain distributions in each separate category

by 0.4054 for the foreign source qualified dividends or capital gain distributions taxed at a rate of 15%,

by 0.5405 for those taxed at a 20% rate. 

include the total on line 1a of the applicable Form 1116.
for those taxed at 0%  exclude them from line 1a

 

this can result in a substantial FTC carryover that may never be used.

 

View solution in original post

SandyG19
Level 2

Form 1116 not showing correct amount on line 1

Thanks!! Yes. I meet the adjustment exception. So this means that I can use the whole dividend amount and don’t have to multiply the amount by 0.4054. I also don’t have to click that box on form view. Line 1a will be the entire amount of the dividend. 
Is this right? 

Mike9241
Level 15

Form 1116 not showing correct amount on line 1

that is correct. if you meet all the rules for the exception no adjustment is necessary.  line 1a will be the full amount of foreign dividends qualified and non-qualified.

 

Mike9241
Level 15

Form 1116 not showing correct amount on line 1

by the way if you are single and have less than $300 in FTC form 1116 is not required at all. you do this by just entering the FTC amount and "various" no quotes for the country. no linking to any column on form 1116

and no entry of the amount of foreign dividends

 

SandyG19
Level 2

Form 1116 not showing correct amount on line 1

Great!  Thanks so much!

SandyG19
Level 2

Form 1116 not showing correct amount on line 1

Good information to have, not only about the tax law, but also about how it connects to TT. 

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