E-file rejected due to ForeignTaxesPaidOrAccruedDt on Form 1116

[Foxbat]

We as TT users are between an authoritarian rock and a corporate hard place:  What the IRS wants and what TT allows.

There is an applicable African proverb:  When elephants fight, the grass gets trampled.

Feeling trampled?

[irsispita]

@drennman @Foxbat 

Indeed, what TT does and what IRS wants might not be the same thing. Yes, "Various" has always been used on 1099-DIV. But for FTC above the $300(600) limit the IRS wants a filled Form1116 and the IRS instructions for that form clearly state that each country should be listed separately with another entry for RIC dividends. Anyway, thanks for your help.

PS Here is the actual quote:

"Generally, if you received income from, or paid taxes to, more than one foreign country or U.S. possession, report information on a country-by-country basis on Form 1116, Parts I and II. Use a separate column in Part I and a separate line in Part II for each country or possession. If you paid taxes to more than three countries or possessions, attach additional sheets following the format of Parts I and II."

Now, this is a lot of work, especially if the dates for each dividend payment are scattered all over the place. And all the numbers are then added up anyway, but this is what the IRS wants. 

[hobrien]

Has anyone been able to solve this?  My return keeps rejecting.

[Foxbat · Accepted solution]

Yes, a solution for most of the reject issues has been found. I posted it about 2-3 weeks ago, you will find the discussion beginning on page 18.   I will repost it now.  The advice is for passive income, particularly from mutual funds.  

[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. 
1. Line (j) is normally paid.
2. 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

[Bouldergo]

I just had my E-file rejected for the same reason. Ttax review finds no error, and I have triple checked and can't see any problem.

My prior year returns have also had same foreign tax situation, with slightly different amounts, but they were not E-filed. Ttax suggests mailing again.

[survij]

Hello Foxbat,

Thanks for helping every one.

However My problem with RMD and withholding taxes, has not been solved. I filed for extension. Hope TT will find their error.

Survij

[Foxbat]

TT does not flag the issue as an error, but the IRS does.  So when you use Step-by-step it will say things are good to go -- they are not.  When you use Forms approach there will not be any flags on the 1099-DIV or Form 1116 either.  You have to go into each and search down the errors on your own.  My previous post explains the process I used.  It only took seven fails before I caught all the errors and succeeded on the eight attempt.  Now that I laid out the steps, hopefully that will reduce the number of attempts others will need to catch the errors the IRS finds but TT misses.

Illegitimi non carborundum

--Foxbat

[goldiegirl]

I have this same problem with my return being rejected because they are asking for an explanation statement for line 3,A which is my standard deduction and has nothing to do with my foreign tax credit. I spent hours on the phone with on of TT tax experts and no offense she wasn't too bright and couldn't figure it out. She waved a red flag and said file my mail. Very lazy on TT part. They don't give a crap about fixing a bug in their program.

[goldiegirl]

I just followed all your steps. Rejected. Again

[Foxbat]

My advice is for Form 1099-DIV problems flowing into Form 1116 dividend related answers.  Form 1116 Line 3A problems are not something I have encountered and attempted to resolve.  I suspect that the solution is similar but related to something flowing from your Form 1116 worksheet or back into your Schedule A.  Sorry I cannot be of further help on your Line 3A issue.

[drennman]

Goldiegirl

Like Foxbat, I don't have a solution either.  But it is super weird as line 3a is an auto-entry that TT is making from your 1040.  It's doesn't appear to be anything you can enter or should override.  

Just a dumb suggestion:  are all the boxes properly checked on your 1040 Worksheet (there is also a Standard Deduction Worksheet you can check out).  As that generates your standard deduction on 1040 line 12 which then is auto-entered to line 1116 3a.   

Could it be that your filing status doesn't match your standard deduction?  Just pulling at a straw.  Apologies if you already checked this.

Otherwise paper filing can get the job done with no more frustrations or calls to TT.

[goldiegirl]

Believe it or not I found the problem. I went back into forms and looked at 1116 worksheet. Lo and behold there was a box  in Part 2  1009 INT/DIV reporting smart worksheet. I checked box A for FT paid /accrued on a 1099 INT or DIV. That it. I e filed and it was accepted. What a giant ass pain. That box should have automatically been checked as I reported foreign taxes paid directly from my Vanguard 1099 DIV . Here's a big middle finger to Turbo tax. I even shared my return with a so called tax expert and they missed it.

[dzavar]

Thanks for explanation! For someone with no accounting background, can someone explain why do I even need to fill this for 1116 if all my 1099s show I paid $0 Foreign tax?! Common sense says if I paid no tax, then I should not get any credit for it, so why bother filling this form? Did I do something wrong along the way in my filling that cause TT force me fill this form?

[goldiegirl]

Go into forms and look at 1116 worksheet. Drop down to Part 2. There is a box below taxes paid. It's a 1099 DIV/INT reporting smart worksheet. Make sure you check the box A  and if you reported on line b or c check those boxes. This is why my return got rejected. This is what fixed it and my e file was accepted.

[goldiegirl]

You only have to file form 1116 if you paid grater than $300 in foreign tax or $600 for joint returns. Just delete form 1116 if you have note paid any foreign tax.