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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10163
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I enter foreign interest income as a 1099-int. Form 1116

Customer Question

I enter foreign interest income as a 1099-int.
Form 1116 doesn't give full credit for foreign taxes paid on that income
What am I doing wrong?
Submitted: 3 months ago.
Category: Tax
Expert:  Lane replied 3 months ago.

Hi George. Lane here.

...

I may not be able to help you with the software aspect of what's going on I (alhough I DO use one of intuit's professional packages for clients, and am pretty familiar with turbotax), but I can certainly tell you the issues that may be causing this from a tax law/administration perspective.

...

First,

Foreign Tax Credit (FTC) is limited by the following factor:

(Foreign income)/(US income + Foreign Income).

.....

... called the "Foreign Tax Credit Limitation," (calculated on lines 15-18 of Form 1116).

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However, you MAY be able to avoid the limitation is to use the "simplified FTC calculation."

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ALL three of the following must be true:

  • All of your foreign source gross income was “passive category income” (which includes most interest and dividends
  • 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-1 (Form 1065), Schedule K-1 (Form 1065-B), Schedule K-1 (Form 1120S), or similar substitute statements
  • Your total creditable foreign taxes are not more than $300 ($600 if married filing a joint return)

...

Please let me know if this helps

...

Lane

...

...

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Expert:  Lane replied 3 months ago.

P.S. The factor above needs to be applied by "category," meaning that you have to do this separately for each category of income on which foreign tax was paid.

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  • Passive Category Income: This category includes investment income such as dividends, interest, rents and royalties as well as income from a qualified electing fund. It does not include rents or royalties from the active conduct of a trade or business.
  • General Category Income: This category includes all income which is not considered passive category income.
Expert:  Lane replied 3 months ago.

. … Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

...

Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986

Expert:  Lane replied 3 months ago.

Hi,

...

I’m just checking back in to see how things are going.

...

Did my answer help?

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

...

But again, let me know if you need more here.

...

Lane

Expert:  Lane replied 3 months ago.

Hi george ... just checking back in again. I've not heard back from you at all.

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Would appreciate your letting me know if this helped.

...

Thanks,

Lane

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