How to calculate U.S government interest and foreign dividends

[hixen26]

I'd like to confirm my understanding of calculating U.S government interest as well as foreign dividends from a 1099-DIV sent by my investment brokerage. This is with regards to the following questions asked in TurboTax:

"Enter U.S. Government interest

Enter the amount of dividends reported on this 1099-DIV from XXX that represents interest from U.S. Government obligations."

"Tell us about your foreign dividends

You entered $XXX of foreign taxes paid. Now enter the portion of the $XXX dividends and distributions that was from a foreign country or U.S. possession."

Here's how I have gone about calculating both, which follow a similar process...

For U.S government interest:

The 1099-DIV provides the federal source income percentage for each of my investment funds. For each fund, I add up the qualified and non-qualified dividends I received for the tax year. Then, I multiply the total dividends  by the fund's federal source income percentage to obtain the amount of U.S government dividends received. Once I do this for each fund, I add up all of the calculated U.S government dividends to arrive at the total.

Similarly, for foreign dividends:

The 1099-DIV also provides the foreign source income percentage for each fund. So again, for each fund I calculate the total dividends (qualified and non-qualified) received during the tax year and multiply the total by the fund's foreign source income percentage. This gives me the foreign dividends received for a fund. Then, I just add up the foreign dividends received from all of my funds to get the total. 

Is this correct? 

[RobertB4444]

No.

Qualified dividends are a portion of the total dividends in box 1.  So you only need to multiply the box 1 dividends by the percentages to arrive at the numbers.

However, your brokerage should be issuing you an annual statement with your 1099-COMB that shows all of the foreign and US Government dividends.  They work for you and you pay them.  You should make them give you these numbers instead of doing this extra work.

[hixen26]

Just to clarify, my 1099 is from Vanguard, and box 1 (specifically box 1a) contains the total dividends from ALL of my investments. For instance, if I own shares of two different Vanguard funds, the dividends from both of those funds are included in box 1a. Each fund also has its own percentage. So I should be multiplying each of these percentages with box 1a? 

Why isn't the percentage of a particular  fund multiplied only by the dividends received from that fund? 

Last year, Vanguard provided a 1099 that did calculate the foreign dividends for me. But this year, they did not do it for some reason. 

[DianeW777]

Yes. If you know the foreign income percentage for each fund multiply each by the total in box 1a to arrive at your total foreign dividend income.  Essentially add the percentages together and arrive at your total foreign dividend income.

The dividend statement provided by Vanguard will show the foreign tax paid, and the foreign income is usually on a separate page. TurboTax will carry your information to start the foreign tax credit (Form 1116) however you need to complete that section for the credit to be applied.

• Where do I enter the foreign tax credit?

[SteamTrain]

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@hixen26 wrote:

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Why isn't the percentage of a particular  fund multiplied only by the dividends received from that fund? 

......

______________________

Correct...As you suspected, you only apply the % to the dividends actually distributed from each individual fund...not to the gross 1a $$.

Box 1a can contain dividends from all sorts of sources as a total, including individual stocks you might own.

So you have to use your supplemental sheets to find out exactly how many $$ a particular fund issued, multiply that by a %, then repeat for each and every Mutual fund that had any US Govt Bonds in it.

[hixen26]

@DianeW777  Thank you for your response, but the calculation you've described (the same as @RobertB4444 ) does not make sense to me. Let's take this example:

Let's say that the number in box 1a is $1,000 and that I own shares of Vanguard's Total International Index and Total International Bond II Index funds. According to Vanguard's table of foreign source income percentages , the percentages for the Total International Index and Total International Bond II Index funds respectively are 90.34% and 59.8%. 

Following the calculation you described, the total foreign dividends I received last year is:

0.9034 * 1000 + 0.598 * 1000 = $1501.4

That's more than the $1000 in total dividends I received for the year. 

The response from @SteamTrain is in line with how I thought I should be calculating the total foreign dividends. Am I misunderstanding you and @RobertB4444's  answers? 

[SteamTrain]

This is an OLD post, but a response to @hixen26  anyhow (the post on March 3 2022, at 3:10PM) , and for anyone encountering this too:

The $1000 in your box 1a is not $1000 each, it might be $700 from one fund and $300 from the other.  You have to look closer at your supplement sheets to see what came from each.

Unless you held ONLY those two funds, the $$ in box 1a can also include $$ from stocks, and other mutual funds, so you really have to delineate where all the $$ came from before making such calculations.

[hnjmm1]

How do you calculate the percentage?

[hixen26]

@hnjmm1 If your investments are with Vanguard, the US government and foreign source income percentages are provided for each fund in the 1099-DIV that you receive from Vanguard. The information is usually in the last few pages of the 1099 under the supplemental info section.