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Turbotax online - no way to enter foreign capital gains and foreign tax paid for them

Forum|Forum|5 years ago
July 17, 2020
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I can enter foreign income and foreign tax paid for interest, dividend and earned income but there is no way to enter foreign capital gains and foreign tax paid for them. This normally should appear on Form 1116 as foreign passive income along with the foreign tax. Since the Form 1116 cannot be accessed and the interview does not allow/ask foreign capital gains and taxes, there appear to be no way to enter this data.

All the answers in the community point to the foreign tax credit link that allows you to enter only interest and dividend income. There is a screen that asks you to enter LTCG but it doesn't seem to do anything.

TurboTax Premier Online

Best answer by rogge1722

Here is the procedure to obtain the foreign tax credit for foreign taxes paid on foreign capital gains.

It is assumed that the reporting of foreign capital gains for U.S. tax purposes has been completed and the next step is to obtain foreign tax credit for foreign taxes paid using form 1116.

Some preliminary work has to be completed. Download the “2019 Instructions for Form 1116” and “Pub 514”.

Open the f1116 instructions and go to page 9. Under the heading “Adjustments to foreign capital gains and losses,” you will be using either worksheet A or B or the worksheet in Pub 514. The instructions will guide you to determine which worksheet to use. Whatever worksheet is used, after completion, record the amount that is to be inserted into line 1a of f1116.

Next go to the foreign tax credit interview. Herein is a screen by screen presentation of a simplified scenario whereby the only income for foreign tax credit are foreign capital gains.

1. Foreign Tax Credit
           Yes
2. Before We Begin
            Yes
3. Foreign Taxes
             Continue
4. Tell Us About Your Foreign Taxes
                Continue
5. Foreign Taxes
                Continue
6. Do You Want a Deduction or Credit?
             Credit
7. Reporting Foreign Taxes Paid
                Continue
8. No Other Income or Expenses
                   No
9. Completing Forms 1116
                 Continue
10. Foreign Tax Credit Worksheet
                 Continue
11. Choose the Income Type
             Make the selection then Continue
12. Country Summary
              Add a country.
13. Country Name
               Select from the list
14. Other Gross Income-Country
              In the description, enter “Fgn. Cap. Gains.”
             Enter the amount from the worksheet.
15. Definitely Related Expenses
              Enter any applicable amount.
16. Foreign Losses
             If you had a net foreign loss from the worksheet, enter it here.

17. Foreign Taxes Paid
          Enter the amount
18. Country Summary
           Done
19. Any Foreign Source Qualified Dividends or Long Term Capital Gains?
               Here, Long Term Cap. Gains refers only to capital gain distributions
               from a 1099-DIv. Leave it blank.

Continue thru the remaining screens until finished.

R

rogge1722Answer

Employee

Here is the procedure to obtain the foreign tax credit for foreign taxes paid on foreign capital gains.

It is assumed that the reporting of foreign capital gains for U.S. tax purposes has been completed and the next step is to obtain foreign tax credit for foreign taxes paid using form 1116.

Some preliminary work has to be completed. Download the “2019 Instructions for Form 1116” and “Pub 514”.

Open the f1116 instructions and go to page 9. Under the heading “Adjustments to foreign capital gains and losses,” you will be using either worksheet A or B or the worksheet in Pub 514. The instructions will guide you to determine which worksheet to use. Whatever worksheet is used, after completion, record the amount that is to be inserted into line 1a of f1116.

Next go to the foreign tax credit interview. Herein is a screen by screen presentation of a simplified scenario whereby the only income for foreign tax credit are foreign capital gains.

1. Foreign Tax Credit
           Yes
2. Before We Begin
            Yes
3. Foreign Taxes
             Continue
4. Tell Us About Your Foreign Taxes
                Continue
5. Foreign Taxes
                Continue
6. Do You Want a Deduction or Credit?
             Credit
7. Reporting Foreign Taxes Paid
                Continue
8. No Other Income or Expenses
                   No
9. Completing Forms 1116
                 Continue
10. Foreign Tax Credit Worksheet
                 Continue
11. Choose the Income Type
             Make the selection then Continue
12. Country Summary
              Add a country.
13. Country Name
               Select from the list
14. Other Gross Income-Country
              In the description, enter “Fgn. Cap. Gains.”
             Enter the amount from the worksheet.
15. Definitely Related Expenses
              Enter any applicable amount.
16. Foreign Losses
             If you had a net foreign loss from the worksheet, enter it here.

17. Foreign Taxes Paid
          Enter the amount
18. Country Summary
           Done
19. Any Foreign Source Qualified Dividends or Long Term Capital Gains?
               Here, Long Term Cap. Gains refers only to capital gain distributions
               from a 1099-DIv. Leave it blank.

Continue thru the remaining screens until finished.

B

BLR2020Author

Thanks buddy. I was able to enter the foreign capital gain using the steps you described.

However, entering foreign income and foreign taxes paid in Turbotax 2019 online is tortuous to say the least. You have to enter dummy foreign tax paid say, $0.01, if you have not paid foreign tax but want to record the foreign income. This is bizarre. Again, the capital gain figure entered in Step 14 is clubbed with all other passive income. A preferred way would be to show it separately in Form 1116. In fact the CPA firm that I used mentioned each major income under passive income separately on Form 1116. That's the right way.

I would again repeat that Turbo Tax online falls way short of expectation in handling foreign income and taxes.