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Old 04-07-2017, 11:37 AM
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Smile Foreign Tax Credit

Since 2012, I was able to get a foreign tax credit every year based on 1099 DIV information; unfortunately some were carryover to the next year, so in 2015 the accumulated carryover (2013-2015)was $916.00

In 2016, the 1099 DIV showed ordinary dividend $2010 and qualified dividend $2010. There were Fed Tax withheld of $596.00 and foreign tax paid $639.00 but I was unable to get any foreign tax credit. This was the first time that I was able to itemized their tax return.Their adj income for 2016 was $192,047. I don't know if there was a glitch with the software, so i began to manually entered the figures, and was able to get the credit; however, the credit was less than what I was getting when I itemized the return (using the past carry forward amount $916.00 + $639=$1555.00)
Once I do that, and remove the entries from form 1116 and entering it unto Sch A, form 1116 does not print since there is no information shown on it.so my questions are as follows:

1. I am required to file form 1116 once foreign tax paid in 2016 exceeds $600.00 with passive income but since that form no longer showing up on my client's tax return, what should I do?

2. Was that a software error before manually entering that information?

I know it's a long explanation but would appreciate it very much if you can enlighten me about it.

Thank you



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Old 04-07-2017, 08:42 PM
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In 2016, the 1099 DIV showed ordinary dividend $2010 and qualified dividend $2010. There were Fed Tax withheld of $596.00 and foreign tax paid $639.00 but I was unable to get any foreign tax credit. This was the first time that I was able to itemized their tax return.Their adj income for 2016 was $192,047. I don't know if there was a glitch with the software, so i began to manually entered the figures, and was able to get the credit; however, the credit was less than what I was getting when I itemized the return (using the past carry forward amount $916.00 + $639=$1555.00)
Once I do that, and remove the entries from form 1116 and entering it unto Sch A, form 1116 does not print since there is no information shown on it.so my questions are as follows:====>Basically, you can choose to take the amount of any qualified foreign taxes paid during the year as a credit or as a deduction. To choose the deduction, you must itemize deductions on Sch A of 1040 . To choose the foreign tax credit, you generally must complete Form 1116 and attach it to your Form 1040 . You must choose either the foreign tax credit or itemized deduction for all foreign taxes paid or accrued during the year. This is an annual choice.If you're a cash basis taxpayer, you can only take the foreign tax credit in the year you pay the qualified foreign tax unless you elect to claim the foreign tax credit in the year the taxes are accrued. Once you make this election, you can't switch back to claiming the taxes in the year paid in later years.


1. I am required to file form 1116 once foreign tax paid in 2016 exceeds $600.00 with passive income but since that form no longer showing up on my client's tax return, what should I do? ======>>You may elect to claim the credit for qualified foreign taxes without filing Form 1116 if All of your foreign source income is passive income, such as interest and dividends; All of your foreign source income and the foreign income taxes are reported to you on a qualified payee statement, such as Form 1099-INT , Form 1099-DIV , or SchK-1 of 1065/1120S/1041; the total of your qualified foreign taxes isn't more than the limit given in the Form 1040 Instructions for the filing status you're using;If you claim the credit directly on Form 1040 without filing Form 1116, you can't carry back or carry forward any unused foreign tax to or from this year. So as said asl;ongas all of your foreign-taxed income was 1099-reported passive income, such as interest and dividends, you don't need a 1116, provided that any dividends came from stock you owned for at least 16 days.Single filers who paid $300 or less in foreign taxes, and married joint filers who paid $600 or less, can omit filing the foreign tax credit form. However, using the form enables you to apply any credit balance to future tax years. Without filing Form 1116, you give up this carryover tax break.



2. Was that a software error before manually entering that information?===> You need to contact the software vendor for tech help. When you use the software to prepare your taxes, they?ll ask you straightforward questions about your foreign income, determine how much of it is deductible (or available as a credit), and fill in all the right forms for you.



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