[Note from Foxbat: This is a compilation of my prior weeks postings on the topic beginning on page 18. If you are reading this, TT has likely not implemented corrections yet.]
I too had difficulties getting e-filed due to rejection related to foreign tax credit. On the 8th attempt to file it went through. I have been filing with TT for about two decades and always with a FTC. To fix the issue, whatever it was, I did the following (I only have passive category income with foreign taxes [specifically, dividends]):
My advice first assumes you have run error check for your entire return and confirmed no other errors in foreign tax credit have been flagged by TT for resolution before you attempt to file. Look for error flags in the Forms (vs. Step-by-step) format. Click the red “errors” stop sign symbol just under the blue TT banner, top left; if all is OK you will get a green checkmark and “Great News: Your return has no errors” at the bottom center of your screen. Errors show up as flags next to the form with an error. If you have done these checks and TT says all is fine and you attempt to file, but the IRS disagrees and rejects the filing and the TT rejection note says it is related to the Foreign Tax credit and to review your answers, that is when my advice kicks in.
I have only tried this with passive category income from mutual funds, if you have more exotic income (some of the other boxes) then this may not help.
You are going to be looking for two major things: Country of Origin and Dates of Payment.
Start with each of your 1099-DIVs that have foreign income. It was easiest for me to locate these using the forms option (vs. step-by-step) in TT.
- If you only have dividend income, in Box 7 go to line c and check the box for A. That tells TT that while you may have multiple 1099-DIVs with foreign income they are all passive dividends. If you have other types of income as well, they go by type into Boxes B or C.
- In the 1099-DIVs go to Box 8 so that both the imported and input spaces say RIC. RIC is the designation for foreign mutual fund dividends from potentially multiple countries. If one was left as "various" or blank, I got a reject. Select "RIC" from the drop-down menu under countries [scroll up, not down, to find RIC] in BOTH locations in Box 8 that asks for country source. Check again that BOTH blanks for foreign country are showing RIC, that has caught a number of us.
- In Box 8 there as a box to be checked if the foreign tax is from a mutual fund. If so (true for most of us), check this box.
Form 1116.
- First check that you have identified the nature of income in the box before Part I. The advice is only applies to passive category income, specifically mutual funds with foreign dividends. For this type of income, the box on line c is checked.
- Part I: Line i. If you have the countries identified in your 1099-DIVs as RIC that should carry over. If not, check you 1099-DIVs again to make sure they are showing RIC. If a 1099-DIV Box 8 was left as "various" or blank, I got a reject from the IRS when attempting to efile.
- All of your passive category income (dividends) should show up in Foreign Country Column “A” as “RIC”. If not, go back to your 1099-DIVs to select “A” in Box 7 line c so you do not have multiple Forms 1116 for one type of income.
- Part II.
- Line (j) is normally paid.
- Line (l) Date paid or accrued. Again, do not use "Various" or leave blank. Use an actual date in mm/dd/yyyy format (I used 12/31/2020), as long as it is not “various” it seems to work. I did not try a non-2020 date. If I left the line as “various” or blank, I got a reject.
Look for error flags in the Forms format again as above. If all is fine and the rest of your return shows ready to fine, complete your filing. While TT may be fine with what you entered, the IRS may still not like it and reject it and TT will identify the reason for rejection as “e-file rejected due to Foreign Taxes Paid or Accrued”. If so, go back to the start of these suggestions (yet again) and review for gaps/omissions again. I found that until I had all of the above lined up the return would reject. It took seven errors, but finally figured out when all the various had been eliminated completely that is when the filing was accepted on the eighth try.
Other tips if you still receive reject notices:
(1) Make sure there isn't some bit of income lurking out there as foreign on a 1099. You can do this by comparing the amount of foreign dividends total from each of your 1099-DIVs to the total showing in the Form 1116.
(2) Confirm the Form 1116 itself does not have any "various" or blanks for dates where you have numeric entries. If it does, then go back to your 1099-DIVs to identify where the entry is coming from and make the correction.
(3) Checked your prior year Form 1116 against this year to assure the non-numeric items were consistent between the two.
(4) Most people use the Simplified AMT option. Changing the option requires, I think, IRS consent and can cause problems, so it is something you do not do casually.
Yes, it is a pain to do all the detail checking. It's a detail check odyssey or mailing the return choice. Hopefully you get to success much quicker than I did. Hope this helps!
