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Old 02-23-2017, 11:29 AM   #21
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Same here for me, all from foreign taxes paid on dividends from VG Total International.

I use Turbotax which allows me to choose to take the credit as a deduction or do the calculating route. I really don't understand the calculating route so rather than just guessing, I choose deduction.
You're almost always better off taking the credit. If you have a $1000 in foreign taxes paid, and you're in the 15% bracket, you only get $150 back on the deduction, but the full $1000 back on the credit, if you owe enough US taxes to take the credit against. I didn't this year, but I carried most of it back to last year, and will carry the rest of it forward for up to 9 years to a year in which I do pay enough taxes. Also, you can't carry back or forward the deduction if it does you no good this year, as would have been my case.
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Old 02-23-2017, 12:07 PM   #22
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Well, made me look....

I have $23 for 2015 and $19 for 2016 that I could take back... however, I do not know if the formula would give it all back to me or not...


AND, I sold my international holdings so I would not have to deal with not getting my credit!!
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H&R Block vs Turbo Tax
Old 02-23-2017, 02:57 PM   #23
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H&R Block vs Turbo Tax

I had some issues with my previous filing when using H&R software. I may give Turbo Tax a go for this year. The IRS has no sense of humor!
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Old 02-23-2017, 04:08 PM   #24
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You're almost always better off taking the credit. If you have a $1000 in foreign taxes paid, and you're in the 15% bracket, you only get $150 back on the deduction, but the full $1000 back on the credit, if you owe enough US taxes to take the credit against. I didn't this year, but I carried most of it back to last year, and will carry the rest of it forward for up to 9 years to a year in which I do pay enough taxes. Also, you can't carry back or forward the deduction if it does you no good this year, as would have been my case.
I usually only have peanuts in the foreign taxes paid. So, I just take the deduction to avoid any head scratching and guessing.
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Old 02-23-2017, 04:19 PM   #25
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I usually only have peanuts in the foreign taxes paid. So, I just take the deduction to avoid any head scratching and guessing.
If you have < $300 ($600 if filing joint) all you have to do is jam it in as a credit. Tap three keys and you're done.

If your passive foreign sourced income is < $20,000, filing for the credit is a bit more time consuming but not complicated. The instructions for form 1116 are a bit intimidating until you cross out all the sections that don't apply -- then it isn't that tricky.

When you have FSI > $20,000 it does get a bit messy.
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Old 02-23-2017, 04:32 PM   #26
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Sure, that makes sense to take the simple route then. However, if it's under $300 ($600 filing jointly) you don't have to fill out form 1116 as long as you meet a couple other criteria, which is sounds like you do. I think you can just take the credit as long as you have some taxes to use it again, and you can't carry it forward or back. Might be worth a quick head scratch to check.


https://apps.irs.gov/app/vita/conten...=international
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Old 02-23-2017, 04:50 PM   #27
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Sure, that makes sense to take the simple route then. However, if it's under $300 ($600 filing jointly) you don't have to fill out form 1116 as long as you meet a couple other criteria, which is sounds like you do. I think you can just take the credit as long as you have some taxes to use it again, and you can't carry it forward or back. Might be worth a quick head scratch to check.


https://apps.irs.gov/app/vita/conten...=international
I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.
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Old 02-23-2017, 05:18 PM   #28
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Foreign taxes paid, alone, cannot be carried forward or carried back. Only excess Foreign Tax Credits (FTC), as computed on form 1116, can be carried forward/carried back.

Calculations for form 1116 include (but are not limited to) allocation of deductions (either itemised or standard), considered exchange rates, reductions, consideration of line 41, 1040 (even if $0), and calculation of the 'limitation' form 1116, line 21. Excess FTCs result from the FTCs available for credit as determined by form 1116, or as determined by calculation of the 'limitation', whichever is smaller.
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Old 02-23-2017, 05:29 PM   #29
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I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.

If you are using any kind of tax program I would think that it would say that it is better to take as a credit...

Heck, I just downloaded all my info from Vanguard and did nothing else... it was in the correct spot as a credit... too bad for me that I have zero tax liability so I do not get it....
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Old 02-23-2017, 07:04 PM   #30
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If you are using any kind of tax program I would think that it would say that it is better to take as a credit...

Heck, I just downloaded all my info from Vanguard and did nothing else... it was in the correct spot as a credit... too bad for me that I have zero tax liability so I do not get it....
Yeah, TT says better to take the credit. I paid $62 FTC in 2016. Just selected credit instead of deduction and by doing so will save me $57 had I filed as deduction. Cool!

Pays to procrastinate about filing .
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Old 02-23-2017, 08:11 PM   #31
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I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.
ok, I was over by 50%. Two key strokes.
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Old 02-23-2017, 08:39 PM   #32
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I'm talking peanuts as in about $50. Not losing a whole lot of sleep over just taking as a deduction.

I probably should look closer again just for grins. But not as a deduction seemed confusing to me in the past.
If your mutual funds paid less than $300 in foreign taxes then you do not even file Form 1116 to claim the foreign tax credit, you just claim the credit. I don't see why in that case one would want to claim the deduction instead of the credit. Besides, you may be taking the standard deduction and not itemizing anyways.
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Old 02-23-2017, 09:26 PM   #33
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I paid $1103 in foreign taxes, but cannot take the credit this year because I have no taxes to take the credit against.
That doesn't seem like a good thing. Water over the damn, but seems you'd want to have taxes to pay to use this.
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Old 02-23-2017, 09:40 PM   #34
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That doesn't seem like a good thing. Water over the damn, but seems you'd want to have taxes to pay to use this.
Read on, I was able to carry most of it back to last year, and will carry the rest forward to some future year.

This was the result of limiting income to get an ACA subsidy. So even if I hadn't been able to use the credit in other years I would've come out ahead, but just barely.
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Old 05-01-2017, 01:31 PM   #35
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One more gripe about H&R Block software and form 1116. As I said before, since I owed no taxes this year, I was unable to take the Foreign Tax credit this year, but I did carry it back to 2015 by filing an amended 2015 return.


I just got a letter from the IRS returning the amendment, because I did not add Form 1116 in my 2016 return. Meaning, the H&R Block software did not include it, presumably because the bottom line of the form for 2016 was 0. But the carry over/carry back to other years is from another line, so you have to file the form anyway, otherwise the IRS doesn't see what you are trying to carry over or back.


Why didn't H&R Block file it for me? Now I have to file an amended 2016 including Form 1116, and re-file my amended 2015. More work, and it delays my refund. This would've been tough for me to catch, because the saved .pdf of my return includes it, probably due to saving the return with supporting forms.


I don't know for sure that TurboTax would've filed form 1116, but this was the final strike against H&R Block. I found it harder to use, the .pdf version of the return isn't indexed like TT does, and now this omission, which I consider an error.
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Old 05-01-2017, 04:29 PM   #36
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One more gripe about H&R Block software and form 1116. As I said before, since I owed no taxes this year, I was unable to take the Foreign Tax credit this year, but I did carry it back to 2015 by filing an amended 2015 return.


I just got a letter from the IRS returning the amendment, because I did not add Form 1116 in my 2016 return. Meaning, the H&R Block software did not include it, presumably because the bottom line of the form for 2016 was 0. But the carry over/carry back to other years is from another line, so you have to file the form anyway, otherwise the IRS doesn't see what you are trying to carry over or back.


Why didn't H&R Block file it for me? Now I have to file an amended 2016 including Form 1116, and re-file my amended 2015. More work, and it delays my refund. This would've been tough for me to catch, because the saved .pdf of my return includes it, probably due to saving the return with supporting forms.


I don't know for sure that TurboTax would've filed form 1116, but this was the final strike against H&R Block. I found it harder to use, the .pdf version of the return isn't indexed like TT does, and now this omission, which I consider an error.

I always look at the form for filing to see what it includes... I do not like the supporting forms as there is a bunch of junk in the middle and I cannot see what the IRS is getting...
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Old 05-01-2017, 04:44 PM   #37
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I don't know for sure that TurboTax would've filed form 1116, but this was the final strike against H&R Block. I found it harder to use, the .pdf version of the return isn't indexed like TT does, and now this omission, which I consider an error.
I look forward to your gripes about TurboTax in about a year.

I've used both and when it comes to Form 1116, they both leave a lot to be desired.
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Old 05-01-2017, 04:56 PM   #38
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I always look at the form for filing to see what it includes... I do not like the supporting forms as there is a bunch of junk in the middle and I cannot see what the IRS is getting...
I realize that now, but I'm not sure I would've detected the missing form. It's a lot easier to spot something that's wrong than to spot something that's missing. Looking through a deck of cards, the 11 of hearts would stand out a lot more than noticing that the 5 of clubs is missing.

And if I did notice it missing, I don't see a way to force the program to electronically include a form it didn't think it needed to include. I think I'd have needed to file a paper copy and print off 1116 along with the other forms. I don't consider that acceptable.

If your cap gains and losses perfectly balanced out to 0, I would hope they still would include Schedule D even though it has no impact to taxes. The IRS will flag it because they'll see the transactions on a 1099-B. It seems nearly as obvious to me that if you paid foreign taxes, the program should always include Form 1116 (unless the user explicitly chose to take the deduction over the credit) even if the bottom line were 0 because of the option to carry the credit forward or backward.
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Old 05-01-2017, 05:02 PM   #39
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I look forward to your gripes about TurboTax in about a year.

I've used both and when it comes to Form 1116, they both leave a lot to be desired.
I've used TT for Form 1116 in the past and it wasn't easy but it was better than H&R B. In past years I've always been able to use the credit so I haven't had this situation to see if it still filed the form. Next year I'm likely to not be able to take the credit so we'll see what happens. If I get bored I might try a scenario using the 2015 TT that I have.
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Old 05-01-2017, 08:21 PM   #40
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I realize that now, but I'm not sure I would've detected the missing form. It's a lot easier to spot something that's wrong than to spot something that's missing. Looking through a deck of cards, the 11 of hearts would stand out a lot more than noticing that the 5 of clubs is missing.

And if I did notice it missing, I don't see a way to force the program to electronically include a form it didn't think it needed to include. I think I'd have needed to file a paper copy and print off 1116 along with the other forms. I don't consider that acceptable.

If your cap gains and losses perfectly balanced out to 0, I would hope they still would include Schedule D even though it has no impact to taxes. The IRS will flag it because they'll see the transactions on a 1099-B. It seems nearly as obvious to me that if you paid foreign taxes, the program should always include Form 1116 (unless the user explicitly chose to take the deduction over the credit) even if the bottom line were 0 because of the option to carry the credit forward or backward.

I am a bit surprised that it would not include the info even if it did not have impact... the H&R program put an IRA form in ours that had zero tax effect.... but it did have the info that was necessary for the return...


I do agree that it would be easy to overlook... I am working on an amended return for my sister who I prepare a return... when I was looking over this year compared to last year I noticed her last year return had the ACA penalty.... and she is in her 70s and has two insurance plans!!! I do not remember what I filled out for it to give her the penalty and did not notice it for some reason... but the two years were similar and when looking it stuck out like a sore thumb....

Oh well....
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