I have Belgian wages and Belgian taxes paid for US Interest. how can I get two 1116 forms generated? Tried 12 time or so, no luck?

[arunas11]

I am a US citizen living in Belgium. I have Belgian wages (general income), but also need to get credit for Belgian taxes paid (passive income). For this two 1116 forms are necessary, but TurboTax refuses to generate two, always puts all income and taxes on same General Income form. Is there any workaround, as I have tried various ways for hours, no luck.

[pk]

@arunas11 , 

(a) why are you not using  Foreign Earned Income Exclusion  ( FEIE ) or are you saying that  you used FEIE  but have unexcluded income and therefore need 1116  , general category in addition to 1116 for Passive category ?

(b) Just to go back to FEIE ( and if you are not using it ), when did you establish foreign tax home  -- when did you arrive there, are you working for a local/private employer ?

(c) Is your family with you ?  Is your employer providing housing assistance ?

I am hoping that you are using a windows download and not on-line  version ( only because I am totally unfamiliar with the On-Line screens ) ?

I will circle back once I hear from you 

[arunas11]

Thank you very much for the reply - I'm, struggling to get this  passive income 1116 form generated for 2 days in a row, taking heart medicine by now, probably I need to take a break from taxes 🙂

I am using Foreign Tax Credit route - it's way better in my situation. I have lost my special tax status Jan. 1, 2024, so now need to pay taxes on US interest and dividends in Belgium, which makes my situation untenable. 

In this case Belgian wages go into General Income form 1116, which is generated fine. 

But credit for Belgian 30% tax paid on US interest and dividends needs to go on Passive Income form 1116 and turbo tax refuses to generate it. I tried so many different ways and advices, nothing really works, TurboTax puts everything on one 1116 form, which is then unusable. 

Would appreciate any suggestion what can be done in this pretty standard situation and I blame TurboTax for it, obviously. 

[pk]

@arunas11 , Please ,

1.  I do not understand  how it is better  for you to use tax credit for  your Belgian wages --- FEIE is always  more tax benign  ( tax credit is at most equal to US tax on the same income ).    Please can you elucidate -- I am assuming that you are indeed meeting the requirements of  Physical Presence Test  either now or  after delayed filing

2. Did you really mean  Interest and dividend s are US sourced  ?  If so   ( and if the tax is beyond the safe harbor amount ), these  incomes  are not passive --- they are "resourced by Treaty "  for purposes of form 1116.  So please can you say more on this .

While I await your answers , will go and refresh my memory on US-Belgium Tax Treaty  -- 

[arunas11]

Yes, "resourced by Treaty " would be correct clasification. 

In this case I am living in Belgium permanently, for more than 10 years. I always use Tax Credit - tried the other method a few time to check and results were always much worse than Tax Credit. 

About interest taxation it's very simple. Let's say I have 10 000 USD US interest and dividends. Belgium taxes those at 30% (more than US in any case). So Treaty says that I only pay Belgian taxes and get credit for them on US tax return, as US taxes are lower. 

In this case there is TurboTax bug, not generating second 1116 form, even though in questionaire it asks related questions correctly. I'm trying to find some ways to get around this TurboTax issue. 

Maybe there is no way and I would need to use another application or do 2nd form manually, but then cannot e-file and it's a lot of calculations.

Thanks again. 

[pk]

@arunas11 , if you are on windows download,  and assuming that you have done everything already -- your US income plus your Belgian wages / SE taxes etc.

(a)  clicked on "form" on top ribbon  ( not forms mode ).

(b) in the search for form 1116 -- then select  the highlighted form 1116  and click add.  It will then show the existing one plus the new one you are about to add -- name  this   with some meaning --like  US Income Resourced.

(c) Go to forms mode , select  the new form 1116 , top right  ( those little zoom button ), select  1116 comp, click that -- this will now open a worksheet of the new  form 1116 -- click --" income resourced by treaty" ---- now fill out the appropriate  amount of   "resourced "income and the taxes paid on this to your tax home country.

See  if this works for you --- it does for me.

pk