Question

Credit on foreign tax paid: Turbotax does not allow one to list multiple countries and itemize the taxes paid in each one.

Forum|Forum|5 years ago
February 27, 2021
8 replies
0 views

After selecting countries listed in 1099-DIV to which my broker paid foreign taxes (to get a credit for the foreign taxes paid on dividends from other countries), the program asks you to "select all countries to which you paid foreign tax o dividends reported on Form 1099-DIV." But if you enter multiple countries, the next page, entitled "Income From Foreign Counties," asks you to "select a country from the list [of the countries you've just entered] on which to report each Form 1099-DIV." The problem is that the supplemental info on a 1099-DIV from a broker lists the income from EACH country. If you had $10 in income from Italy and $20 from France, you would select Italy, type in $10 . . . and then all the other countries disappear from the list. In other words, you are not able, in this example, to enter the info on France (or any other countries).

TurboTax Premier Online

R

rogge1722

Here is a suggested technique to enter the data for foreign tax credit.

There are X distinct countries. Each country will occupy 1 column in form 1116.

The arrangement is to create X fictitious 1099-DIV’s, each to represent one distinct country. The main 1099-DIV will end up serving only U.S. sources.

Preparation:

I suggest getting the data ready on a spreadsheet. To begin with, for reference, record the amount on both 1099’s boxes 1a, 1b and box 7. Also the amount in schedule B, line 6.

On the spreadsheet, dedicate one column for each country.

Let’s assume that column A is for Canada. From the broker’s supplemental info, insert the ordinary dividends in box 1a. If Canada should be on more than one 1099, then enter them separately then add them up. Do the same for all qualified dividends in box 1b and taxes paid in box 7. These amounts must then be subtracted from the respective 1099’s so that the totals remain constant.

In column B, repeat the same format for the country it represents. Continue on with column C, etc. to the end.

The subtractions can be done piecemeal or any way you like, taking care that it is accurate. When you are done, the main 1099’s will display only the U.S. amounts in box 1a, box 1b and in box 7, make sure they are empty.

Now bring up a blank 1099-DIV. For clarity and convenience, name the payer “Canada.” Fill in box 1a, 1b, and box 7 from the spreadsheet data for Canada. Repeat this format for the remaining 8 countries.

You are now ready to enter the foreign tax credit interview. As they are all passive category, they can be entered without regard to the amount of foreign tax paid as prior postings stated. However, if there is any general category income, that would be an issue. I’ll assume that’s not the case.

During the interview, you will come across a screen header “Report Foreign Tax Paid to (Country). Underneath is “select” and “Dividends paid by”. This screen can display only about 6 payers at a time. The remaining payers are on a succeeding screen. Also you may be asked to submit the date paid for each country. Use 12/31/2020.

N

nikesyrena

I had not tried it that way but I think what you suggest works.

G

gloriah5200

Yes, TurboTax does allow the listing of an endless list of countries. You start by selecting that foreign taxes were paid by a country...enter the type of income, the amount of income and the amount of tax paid.

Both the credit and the deduction are entered in the same place. Here's what you do:

Make sure you've entered all your foreign income.
From within your return, search for foreign tax credit and select the Jump to link in the search results.
Answer Yes to Did you pay foreign taxes in 2020 or have credits to use from a prior year?
Follow the instructions to get the credit or deduction.

In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through this section.

If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit if your situation requires it.

Note: You won't be able to take a credit or deduction for taxes paid (or accrued) on excluded foreign earned income or housing. This is because excluded income and housing isn't taxed in the first place.

Related Information:

Please refer to the additional information at the following link:

Where do I enter the foreign tax credit

IRS Instructions for Form 1116

S

segolden1

I have $95 in foreign tax credit, much but not all from dividends, some from cap gains. I would like to fill out a 1116, but TT locks me in to tacking the credit without form 1116; I assume because of the small $ amount. But according to IRS, to avoid using 1116, the entire foreign taxes paid must be entirely from dividends. I realize IRS is highly unlikely to audit this small amount but TT should do it right. TT didn't even ask how much came from dividends. Disappointed.

R

RobertB4444

@segolden1 You're all good. As long as the foreign taxes are reported on a 1099-DIV you should be set. Here are the IRS qualifications for skipping the 1116 this year-

You may be able to claim the foreign tax credit without filing Form 1116. By making this election, the foreign tax credit limitation (lines 15 through 23 of the form) won't apply to you. This election is available only if you meet all of the following conditions.

All of your foreign source gross income was “passive category income” (which includes most interest and dividends). See c. Passive Category Income, later. However, for this purpose, passive income also includes (a) income subject to the special rule for high-taxed income described later, and (b) certain export financing interest.
All the income and any foreign taxes paid on it were reported to you on a qualified payee statement. Qualified payee statements include Form 1099-DIV, Form 1099-INT, Schedule K-1 (Form 1041), Schedule K-3 (Form 1065), Schedule K-3 (Form 1120-S), or similar substitute statements.
Your total creditable foreign taxes aren't more than $300 ($600 if married filing a joint return).

Here is the original IRS publication.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

J

Jewelee1991

Mr. Houston,

You are right. And no matter what seems to be entered, Turbo Tax wants more forms completed, which is not why we buy Turbo Tax, but Turbo Tax seems to want an endless amount of forms completed on information that is already entered. Something is amiss (no offense intended to the two fine people who have contributed in the responses below.)

N

nikesyrena

You are 100% correct. This is an idiotic process. If your purpose in using Turbo Tax is to demonstrate work arounds that consume endless hours to compensate for the inability of the software to deal with this issue, then you win the Turbo Tax Geek of the Month award, but if you are like most of us and just want to get this **bleep** chore over with, then the work arounds are needless time consuming BS. I have complained about this ad nauseum for years but no avail. It is a major software flaw. Some simple suggestions are: sell all of your foreign stock, or put it all together on s spread sheet and make a single entry ( aggregate all dividends and all withholding and make one entry for country "various") and hope for the best. Keep complaining and maybe they will fix it. I almost want to let my accountant do it, but I find that actually doing my taxes every year reinforces my view that we are over taxed and over regulated by idiots who have no idea what they are doing. It is also useful for tax planning and having a full understanding of what the tax implications of your investments are

J

Jewelee1991

Thank you. Thought is was me.

Also, we need to stop companies from "transferring" offshore, but that's another war...

L

LCircuit

Really frustrating that Turbotax every year has same problem and never fixes it for its customers 😞

N

nikesyrena

I did my annual foreign tax credit ordeal and this year I just consolidated all of the dividends and all of the withholding taxes into a single entry ( let's say Germany). It worked. Then , my only problem was that there seems to bee a requirement in the 1116 form for tax basis entries for which no data entry is called out by the software. It will come up when you do your review. Since my foreign dividends were from 5 different accounts ( 4 grantor trusts and a joint account), this took another 30 minutes since they want your total tax basis and then the portion that generates foreign income, whether or not there are withholding taxes ( UK, for example, does not withhold taxes on dividends). Good luck.

J

Jewelee1991

I have the feeling Turbo Tax wants us to pay up for the next feature, but for most of us these taxes are such small amounts of money. And, I don't think the tax code will get changed to our advantage....

V

VSP1

I have the same problem even after reading and following instructions under the more info box. This is an over simplification but it mentions you must enter the largest tax credit country/income category first and then proceed through the whole interview without entering other countries - then go back in and enter other countries. Unfortunately, the only way to revisit the field to make another entry is to say yes to revisit which then removes your first entry. I think this is a software glitch that requires a software correction by intuit. If someone has a workaround, please let me know!!!

AmyC

Nothing should be removed when you go back to the 1116. You should be able to select the Foreign Tax Credit and enter up to 3 countries for the same income category. If you have income from different categories, you must complete one form before starting with another type of income.

This means you start with one type of income, enter the first country, complete it, then enter the second and third countries, if applicable. Next, you enter the new income category type, repeat by going completely through the first country.

Review any carryover and adjustment along the way.

@VSP1 If you are using desktop, make sure your software is up to date. If you are using the online version, you may need to clear cache and cookies,

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

V

VSP1

Thank you Amy C. I have the 2022 turbo tax premier CD and it is and was already fully up to date. I followed the above directions my first time around entering the two countries I have for international taxes paid on my dividend statement being South Africa and Canada ( Turbotax already had me in the passive income category) - it then asked me to select the 1st country which I did but the foreign tax summary screen you include above is nowhere to be found. It just asks if I want to go back and review the input. If I go back, it deletes my prior entries for the 1st country. If I go forward, it continues with the final process without including the 2nd country. I tried deleting the exhibit and repeating the process but wind up with the same result.

Are your above instructions for the on line version?

G

GregY

I am having this exact issue in TurboTax Premier 2022. I have tax paid to several countries, and when I enter the tax amount for the first county, TTax wipes out all of the other countries I've listed. I'd really appreciate help with this. It's very frustrating to enter a lot of data, only to have it deleted.

A

AbrahamT

See this

Follow these instructions as indicated HERE

Please bear in mind that when you get to the section "Tell Us About Your Foreign Taxes", you hit None of These Apply.

When you get to the section "Do You Want the Deduction or the Credit?" say Take A Credit.

I hope this will work for you.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

G

GregY

AbrahamT: Your reply does not address the the issue. The problem is that TurboTax Premier allows me to select multiple countries, as shown in the image pasted into your response, but when the income comes from a single payor (say, Fidelity), it does not allow me to assign income to the selected countries. It only allows the income to be assigned to one, deleting the rest of the countries chosen.

This wouldn't be a problem if there were multiple payors with one country each, but with multiple Fidelity accounts and multiple countries, it certainly seems like a bug, one that causes a lot of frustration.

Premier has been a disappointment. I chose it because it appeared to be intended to help with complex issues like this, but I haven't come across any features that actually add value. Or work properly.

T

Troubletos

Here we are in 2023 and the problem still has not been corrected by TurboTax. I have five countries I need to list. TurboTax states that the IRS must have each country listed specifying income received and foreign taxes paid by each country. I listed five countries. I selected the first country "Canada". The next screen states "list income and taxes for CANADA.". I go to the next screen thinking I will do the same for the next four countries and it goes to the next series of questions, like I was done listing everything. When I go "back" I find all the other countries were deleted.

I cannot simply make up "extra" 1099-Div as TD Ameritrade had the total taxes paid on one page. If you alter or override TurboTax it will not allow you to E-File either.

QUESTION is: why hasn't TurboTax fixed this problem by now? It's been over two years. By the way I did select "take the credit". I have turbotax home and business.

UPDATE: I see you can also select "VARIOUS" when you select a country. This way you can lump everything in one entry. Maybe this will solve the problem.

P

phoenix9

After numerous hours (phone calls and emails ) with TurboTax, I give up AGAIN this year. The problem seems isolated to their desktop (CD) versions and (according to them) does not happen on their online version. Using "Various" as one country (and totalling all countries into this) is a work-around, but it goes against their OWN guidance that the IRS wants each country individualized. I will just keep the list of separate countries with their data on hand in case I ever get audited/questioned on this. I certainly wish TT would fix this on their CD versions!!!!!

T

Troubletos

I hear ya. It is odd that the online version has no problems but the CD version does. Seems like a quick fix as the programming would be the same online or CD. Very odd why they don't want to make the correction.

I wouldn't worry about the IRS red flagging you if you lumped them all together under "various." For one it won't change what you owe or it won't change your credit amount. I would just lump it together and be done with it, then complain again to TurboTax.

So don't feel guilty if you fudge a little combining those countries. Either that or go online and do your return?

C

craig miller

what! I have three different dividends from the same company but reported by two brokerages and a third reports to me directly. What do I do? I can't enter an additional source?