Question

Foreign Tax Credit: Qual Div and LT Cap Gains should have a value of at least $XXXX

Forum|Forum|6 years ago
April 13, 2020
3 replies
0 views

When I get to the review, I am getting an issue stating:

"Form 1116 (COPY 1) -- Foreign Tax Credit Comp Wks: Qual Div and LT Cap Gains should have a value of at least $XXXX. based on the 1099-DIV worksheets that are linked to this country."

Based on the supplemental disclosure on my 1099-DIV froms, $XXXX is definitely the wrong dollar amount and it is unclear where TurboTax is getting this number.

When you go through the foreign tax credit section in TurboTax, you are asked to assign a country to your foreign tax reported on your 1099 statements and elsewhere. You are also asked how much income was earned in each country. It appears that the income assigned to one or more of the countries must be less than or not much more than the tax paid. The income should be considerably higher that the tax, since the tax is only a small percent of the income typically.

I suggest you to back through your foreign tax credit entries in TurboTax and make sure you entered the correct income for each source of foreign tax paid.

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

tax555Author

All of the income is assigned to RIC and it is ~10x greater than the the tax. My 1099-div forms clearly state foreign income, how much of the foreign income was qualified, and foreign tax. I entered these amounts exactly and checked the numbers countless times.

The minimum figure that TurboTax is suggesting does not appear to have any logic behind it. It is many times higher than the foreign qualified income reported across all of my 1099-div forms.

Employee

From the 1099-DIV Worksheet.

The minimum foreign qualified dividends = 1b +7d -1a.

The following procedure provides more details.

Open a new spreadsheet.

Column A is used for both qualified and unqualified dividends, aka. “Ordinary dividends”.

Column B is used for qualified dividends only.

In cell A1, insert the worldwide ordinary dividends. This is the amount in the 1099-div, box 1a.

In cell A2, insert the foreign ordinary dividends. This amount is derived from the broker’s supplemental info.

In cell A3, subtract A2 from A1. The result is the U.S sourced ordinary dividends.

In cell B1, insert the worldwide qualified dividends. This is the amount in the 1099-div box 1b.

In cell B2, insert the foreign qualified dividends. This amount is derived from the broker’s supplemental info.

In cell B3, subtract B2 from B1. The result is the U.S. sourced qualified dividends.

Each cell in column A must be equal to or greater than the corresponding cell in column B. If that is not the case then there is an error. Recheck all entries..

In case it's useful for Vanguard users: The Vanguard consolidated 1099 form (which includes 1099-DIV), on the page "Mutual Fund and UIT Supplemental Information", lists "FOREIGN SOURCE INCOME PERCENTAGES" for each fund that has foreign source income. The percentages listed are

Fgn Source Inc Tot

Fgn Source Inc Qual

Fgn Source Inc Adj

The first two, "Fgn Source Inc Tot" and "Fgn Source Inc Qual", matches up with the percentages listed in column 1 and 2 of the "Foreign tax credit information for eligible Vanguard funds" PDF, available here for 2021 tax year: https://personal.vanguard.com/pdf/FASFTCWS_R_012022.pdf

[I am uncertain about this paragraph:] I think the OP is looking for "Fgn Source Inc Qual" (i.e., Foreign source qualified income) because I think this is the sum of foreign source qualified dividends and foreign source long-term capital gains. I think this percentage should be multiplied by "Total Dividends & distributions" for each fund to get the dollar value of the foreign source qualified income for that fund. Then sum over all funds to get the total foreign source qualified income.

I also have similar problem. In the Form 111, there is actually a number in line g "Ordinary Income". But line h "Qual. dividends and LT Capital Gains" is empty. Should I just copy the ordinary income value of line g to line h as qual. dividends?