Help with Foreign Tax Credit

[user17754657176]

I'm trying to get the foreign tax credit to work.

I have a betterment statement that has

The amount of foreign sourced income included in Box 1a of your 1099-DIV is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000

The amount of foreign sourced income included in Box 1b of your 1099-DIV is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000

I entered the 10,000 in the 1099-DIV for portion of the 20000 dividends and distributions that was from a foreign country, but I'm not sure where to input the 5k value. 

When I smart check the Foreign Credit, it pops up an error with the Foreign Tax Credit Comp Wks: Qual Div and LT Cap Gains should have a value of …, but the form is blank for row h. How do I get TT to fill that row in, or how do I calculate it myself?

[NCperson]

@user17754657176 - what is in Box 7 of the 1099-DIV statement? if that is under $300 ($600 if filing JOINT), no Form 1116 is necessary.  Let's start there.  

[user17754657176]

1200 so I can't use the $600 skipping method.

[NCperson]

@user17754657176 I suspect the $5,000 goes nowhere.  The $10,000 is the total foreign sourced income.  The $5,000 is a subset of that, not an addition.  

[user17754657176]

Ok, but then I'm still stuck with TT marking my return as an error because it thinks more money should be in the Qual Div and LT Cap Gains row, and right now that's blank. I need to get past that error in Turbo Tax.

[DaveF1006 · Accepted solution]

Follow these steps exactly to clear the "Row h" error:

Step 1: The Foreign Tax Credit Interview

1. Open your return and click on the Federal tab (or Deductions & Credits).
2. Scroll down to Estimates and Other Taxes Paid.
3. Find Foreign Taxes and click Start or Revisit.
4. Answer Yes to "Did you pay foreign taxes?" and continue until you reach a screen titled "Tell Us About Your Foreign Taxes." * Note: Select "Passive Income" as the category for dividends.

Step 2: Selecting the Source (RIC)

1. When asked for the country, select "RIC" (Regulated Investment Company) from the dropdown. Betterment accounts hold ETFs, which are almost always classified as RICs.
2. On the screen for "Description," you can simply type "Betterment."

Step 3: Entering the $10,000 and $5,000

This is the crucial part where you satisfy the "Smart Check" requirements:

1. Gross Income: Enter $10,000. (This is the total foreign income from your statement).
2. Continue through the screens until you see a screen titled "Foreign Qualified Dividends and Capital Gains." 3. TurboTax will ask: "Do you have any foreign qualified dividends or long-term capital gains?"
3. Select Yes.
4. In the box for "Foreign Qualified Dividends," enter $5,000.

This is what finally populates "Row h" on the Worksheet and stops the error.

Step 4: Entering the Tax Paid

1. Continue until you reach the screen for "Foreign Taxes Paid."
2. Enter the amount from Box 7 of your 1099-DIV (which you mentioned was $1,200).
3. Ensure the date paid is 12/31/2025 (or the date your dividends were issued).

@user17754657176

[user17754657176]

My issue was I didn't understand what I was supposed to enter in the steps for foreign qualified dividends. But your answer was perfect. Thanks again

1. Continue through the screens until you see a screen titled "Foreign Qualified Dividends and Capital Gains." 3. TurboTax will ask: "Do you have any foreign qualified dividends or long-term capital gains?"
2. Select Yes.
3. In the box for "Foreign Qualified Dividends," enter $5,000.