Question

Form 1116 Error TurboTax

Forum|Forum|3 years ago
March 20, 2023
1 reply
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HELP . . .

IRS instructions explain how to elect to claim the foreign tax credit without filing Form 1116.

This specifies that the foreign taxes don't exceed $300 (single).

IRS instructs me to enter the amount on Schedule 3 , line 1.

But when I do this TT takes me to a worksheet with only two options: Deduction or 1116 .

Form 1116 generates a much lower credit.

I have deleted 1116 several times . Schedule 3 , line 1 is initially blank but when I enter try to enter a number , a new 1116 worksheet appears with the same wrong options .

rhs3

J

JohnW152

First, make sure you qualify for the credit without filing Form 1116.

According to Election To Claim the Foreign Tax Credit Without Filing Form 1116 in the Instructions for Form 1116:

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).

The income must be passive, then, and the income and foreign taxes paid must have been reported on one of the qualified payee statements described above.

So, for example, if your foreign taxes paid were for interest on a Form 1099-INT, the foreign taxes paid would have to be reported on the 1099-INT, which you would input into TurboTax.

Foreign tax paid is reflected in Box 8 of Form 1099-INT, and an entry there that's equal to or lower than the $300/$600 limit would generate an entry on line 1 of Schedule 3, without the need for Form 1116.

R

rhs3Author

My total foreign tax is $272 . It-is all reported on 1099=DIV ( Box 7 ) with the forms downloaded into

TurboTax from Vanguard and Schwab . It is all passive income and I have no carryovers from previous years.

And I would expect this to automatically generate an entry for Schedule 3 , line 1 of $272 without 1116.

For 2020 and 2021 TurboTax did exactly this with nearly identical amounts and sources of foreign tax.

This year TT takes me to a worksheet with only two options: Deduction or 1116.

I have deleted 1116 several times. Schedule 3, line 1 is initially blank but when I try to enter a number,

a new 1116 worksheet appears with the same wrong options

J

JohnW152

This sounds like it should be generating on Schedule 3, line 1.

I know you've deleted Form 1116 several times; have you tried deleting the 1099-DIV and re-inputting it manually? If not, try that.

You probably know how to do it by now, but here's the path:

If you don’t see 2022 TAXES in the left pane, select the dropdown to the right of Income & Expenses on the Hi, let’s keep working on your taxes! page and then select Let’s get started, Pick up where you left off, or Review/Edit.
- Otherwise, in the left pane, select Federal, then Wages & Income (This is labelled Income & Expenses in TurboTax Self-Employed)
Scroll down and select the Show more dropdown to the right of Investments & Savings
Select Start or Revisit to the right of Dividends on 1099-DIV
Select Yes on the Did you receive any investment income? screen, then select Continue
- If you see either the Your investments & savings or Here's your 1099-DIV info screen, select Add investments or Add another 1099-DIV as appropriate, then select Continue
On the next screen, select Enter a different way, and follow the instructions to enter your 1099-DIV

If this isn't helpful, please indicate whether you're using the Online, Desktop/CD or Mac TurboTax product. Also indicate what version -- Deluxe, Premier, etc.