TurboTax: Foreign Tax Credit, Form 1116 Schedule B mess

[Midpack]

I don't want to use any other software unless I absolutely have to. I like that TT carries forwards the required information from last year (IRA cost basis, FTC carry overs etc) . I assume, I'd have to enter all that into a new sw package & am afraid I'll miss something important.

That’s what makes me hesitant to try another software package, but I realize that’s by design. There is a lot of prior year info I’d have to recreate if I switched, but I’m capable. We’ll see how this resolves with TT.

 

[Midpack]

No. They have had 1116 available for a while but if you have carryover then no e-file. You’ll have to print your return then paper mail. OLT.COM supports 1116 sch b and I have everything ready there to e-file. I usually file 1st week of April.
Like all of you, I am extremely disappointed with big names like TT and HRB. I bought HRB this year and got a copy of TT from my brother and stuck. Why in the world these big names think that it will be just fine to paper mail your return when there is a huge backlog at IRS! Tiny company like olt made it work and these big names have been coming up with empty promises and excuses for past three weeks.

Me too. If TT doesn’t fully resolve this issue including eFiling, I’ll most likely try HRB next year.

Ideally if you are going to own international funds you have them in taxable so that you have a chance to recoup the foreign taxes paid. I got out of them because the distributions were higher than domestic index funds like VTSAX (VG US total stock index) and they were also harder to predict. I'm giving away a few thousand $ in unused FT credits but it would be hard for me to be able to claim them the way my taxes have been in retirement so basically I've given up on them now rather than letting them probably expire unused.

I’m going to read up more on all this (to find out why it’s not as simple as a full credit for FT), as I have four years of FTC and AMT carryovers I’d rather not have. This year is worse, but getting through the form 1116 has been a hassle every year since 2018.

 

[cathy63]

...I’m going to read up more on all this (to find out why it’s not as simple as a full credit for FT), as I have four years of FTC and AMT carryovers I’d rather not have. This year is worse, but getting through the form 1116 has been a hassle every year since 2018.

The credit is limited according to the percentage of foreign income you have. If you make 10% of your money overseas, then the foreign tax credit maxes out at 10% of your U.S. tax liability.

Your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources.

source: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-how-to-figure-the-credit

I carried forward our unused credit for about three years and we weren't using up any of it, then I thought about it for a while and figured out that the foreign tax rates we're paying are a lot higher than our U.S. marginal tax rate and that is unlikely to change any time soon. So basically I would be tracking these numbers every year for 10 years, only to have the credits expire before we could ever use them. So I decided to stop the carry-forward and just lose the credit we can't use in the current year instead of 10 years from now. For us it's less than $50/yr.

This could end up being a bad decision if one of us dies and the other's tax rate goes up enough that they might have been able to use the credit after all, though hopefully the survivor is not really going to need that ~$500 I let the government keep. Also, it looks like the tax torpedo will hit us around the year DH turns 75 when we both have RMDs, so I might start tracking foreign tax credit again when he's 65. That gives TTax 5 years to figure out how to handle these three new 1116 schedules before I have to deal with them.

 

[Phroig]

I’m not a tax expert, but I believe the most you can claim is your effective tax rate applied to your foreign income. One strategy is to own individual stocks from countries that don’t withhold (e.g., U.K.). A few others (e.g., Canada and Germany) don’t withhold if the stocks are held in an IRA.

Edit: I see Cathy just posted the computation.

 

[Midpack]

The credit is limited according to the percentage of foreign income you have. If you make 10% of your money overseas, then the foreign tax credit maxes out at 10% of your U.S. tax liability.

source: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-how-to-figure-the-credit

Thank you very much, for saving me having to figure it out. I used to get a full FTC credit, and that changed in 2018 and especially thereafter. I started large Roth conversions in 2019, and my FTC has fallen dramatically. I’ll stop conversions about the time my carryovers reach 10 years, so maybe I’ll get some of it back. So I might as well keep track, TT was/is doing that for me.

 

[retire2020]

Me too. If TT doesn’t fully resolve this issue including eFiling, I’ll most likely try HRB next year.

Nah Midpak, Dont bother switching. HRB has their own issues and shortcomings. They are missing Charles Schwab from their list of 1099-div import(last and a year before too… and they never fixed it). TT is at least saying they might fix the issue on 1116 sch b and e-file where as HRB just said no. Between the two, I would stick with TT. Hopefully in the worst case by next filing season they will be ready.

For this year, I will just use OLT.COM and e-file. I will decide next year if I want to stick to OLT or go back with TT.

 

[marcuscato]

I am a bringer of good news. I just saw this on the website. Form 1116 Sch B will be available for e-filing on 11th March 2022



https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_windows_individual.htm...

Federal Individual Form Availability, Print, E-file
Form 1116 Sch B, Foreign Tax Carryover Reconciliation Schedule for AMT, 03/10/2022, 03/11/2022

 

[target2019]

Bad link, marcuscato.

Start here and select your product: https://ttlc.intuit.com/community/f...tax-individual-personal-tax-products/00/26224

 

[Midpack]

Bad link, marcuscato.

Start here and select your product: https://ttlc.intuit.com/community/f...tax-individual-personal-tax-products/00/26224

That's great news if they're able to have an update for those of us in the form 1116/Sched B boat...

 

[rkser]

I too am in the same boat, but more lost (ignorance is bliss) than some of you for taking Credit for the Foreign Taxes paid with Total International Stock Index VTIAX (& now VXUS).

I would rather wait & keep things at one place with Turbo Tax (Premier) & hope TT will come thru. Yes, Form 1116 gives me an error & we do have FTC carry overs with Roth Conversions in last few years.

Worst case scenario, .... if we do try to file with OLT.com for yr 2021 or some other Tax Software which has the sch B for Form 1116 efile available, how will that software know our FTC from TurboTax.

I do not know how coming back to TT in future will work out ?
We recently transitioned from our accountant & this will be our 3rd year with Turbo Tax & this problem is unsettling.

Any thoughts...?
Any experiences from people who have jumped between different tax software.

I can see myself typing the demographics, but may have problem in following & getting numbers like prior FTC to another tax software.

Thanks

 

[mn54]

I am a bringer of good news. I just saw this on the website. Form 1116 Sch B will be available for e-filing on 11th March 2022



https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_windows_individual.htm...

Federal Individual Form Availability, Print, E-file
Form 1116 Sch B, Foreign Tax Carryover Reconciliation Schedule for AMT, 03/10/2022, 03/11/2022

I hope you are right but I have seen TT say they will have a form ready on a set date only to push the date back. I will believe it when I see it.

 

[hkao7]

Just saw the TT forms availability link for 1116 schedule B and saw the date changed to 3/10 and e/f ready by 3/11/2022!

 

[cathy63]

...Worst case scenario, .... if we do try to file with OLT.com for yr 2021 or some other Tax Software which has the sch B for Form 1116 efile available, how will that software know our FTC from TurboTax.

I do not know how coming back to TT in future will work out ?
We recently transitioned from our accountant & this will be our 3rd year with Turbo Tax & this problem is unsettling.

Any thoughts...?
Any experiences from people who have jumped between different tax software.

I can see myself typing the demographics, but may have problem in following & getting numbers like prior FTC to another tax software.

Thanks

If you want to use other software, such as OLT, you will have to enter everything from scratch. It won't import your prior year's return with the carryover.

If you do file with OLT this year and want to use TurboTax next year, then the best option depends on if you've already purchased TurboTax this year or not. If you have bought it, then do your return in TTax and just don't file it. You can use it as a double-check on whichever software you do file with and you'll have it available for import next year. If you don't buy TTax this year and want to go back to it next year, then you would have to start a new file when you do.

 

[rkser]

If you want to use other software, such as OLT, you will have to enter everything from scratch. It won't import your prior year's return with the carryover.

If you do file with OLT this year and want to use TurboTax next year, then the best option depends on if you've already purchased TurboTax this year or not. If you have bought it, then do your return in TTax and just don't file it. You can use it as a double-check on whichever software you do file with and you'll have it available for import next year. If you don't buy TTax this year and want to go back to it next year, then you would have to start a new file when you do.

Thankyou so much for answering my question.

Yes, we are about done completing our Taxes in 2021 TT Premier CD Version, So, we complete our Taxes in TT & not efile them from TT if we want to come back to TT in future years to take the benefit for the Foreign Tax Credit carry over info in TT.

Hopefully we may not have to go to say olt.com if TT comes through with the required Schedule B of Form 1116.

Thanks

 

[RASAP]

Just updated TurboTax and it appears that Form 1116 Schedule B is now fully supported and allows e-filing.

 

[rkser]

Great news !! Thankyou for your post.
I am happy I waited for Turbo Tax to come thru & they did.

 

[audreyh1]

Just updated TurboTax and it appears that Form 1116 Schedule B is now fully supported and allows e-filing.

Great!

 

[Midpack]

So I got the TT update, and it runs through Smart Check and tells me I am ready to file, eFile and all thank goodness. But there is no foreign tax credit calculated? Even though I show foreign taxes paid from my 1099 box 7, there's nothing entered on (the new) SchB form 1116? If I enter numbers in the same manner as my 2020 form 1116, I have a foreign tax credit of $151 for 2021? I'm so confused...and I pay for TT so I don't have to figure this stuff out.

 

[walkinwood]

Mine did show the foreign tax credit. It let me get through the entire efile process, but couldn't eFile. The error said that 1116 part B pdf was not attached (or something similar). I'll wait till next week to try again.

 

[marcuscato]

So I got the TT update, and it runs through Smart Check and tells me I am ready to file, eFile and all thank goodness. But there is no foreign tax credit calculated? Even though I show foreign taxes paid from my 1099 box 7, there's nothing entered on (the new) SchB form 1116? If I enter numbers in the same manner as my 2020 form 1116, I have a foreign tax credit of $151 for 2021? I'm so confused...and I pay for TT so I don't have to figure this stuff out.

If you do not have a *carryover* for next year then *Form 1111 Schedule B* will have 0 values or not included at all. The main Form 1116 itself will have your FTC for this year. What are you seeing in the main form 1116? Does it not show the $151?

 

[marcuscato]

Mine did show the foreign tax credit. It let me get through the entire efile process, but couldn't eFile. The error said that 1116 part B pdf was not attached (or something similar). I'll wait till next week to try again.

My guess is you are using Mac or Windows. If so, this is a known issue - TT is trying to locate Form 1116 Sch B in the attachment folder. You can either choose to wait for TT to fix it or try this workaround (try "attachment" and "attachments" both):

f you run into attachment issues on Windows/Mac you can just download the Form 1116 Schedule B as PDF into either C:\attachment\Form1116ScheduleB.pdf on Windows or the /User/<username>/attachment/Form1116ScheduleB.pdf folder on Mac.

 

[Midpack]

I had to complete the form 1116 manually to get the (partial) tax credit of $146. I just eFiled and it was accepted about 20 minutes later (I’m on a Mac using a download TT Dlx). My FTC and AMT carryovers were all correct, they weren’t until I did the form 1116 manually. OTOH, the new Sched B form 1116 still doesn’t show my 2021 FTC - blanks, only 2018 thru 2020 show. Frustrating experience this year.

 

[braumeister]

I just eFiled and it was accepted about 20 minutes later

Gotcha beat. Mine took 11 minutes.
But my state return took almost 11 hours to be accepted.

 

[explanade]

I'm not even sure I've been doing the FTC correctly.

I just go through all rows on a long 1099-DIV and wherever they have some foreign taxes paid, I go and look at the income on the same line as those foreign taxes.

Then enter all those in TT for the 1099-DIV when TT walk you through on calculating the FTC.

 

[audreyh1]

That sounds about right. The only other factor is what % of the income from the fund was foreign income. Not all are 100%, so you have to adjust. We used to have to go to the fund website to get the details.

Now Fidelity explicitly provides the foreign income info in the supplemental section of their 1099-DIV.

If your funds are held at Fidelity they are providing all the needed info, even for non-Fidelity funds.