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Posted by parrisbraeside@yahoo.ca on March 16, 2007, 10:16 pm
Please log in for more thread options 0b3hks...@sneakemail.com wrote:
> I have asked this question on forums.turbotax.com and got no
> responses. So I'll try it here.
>
> I have $366 of foreign tax credit -- all reported on
> 1099-DIV (dividends and mutual fund distributions).
>
> [TurboTax] In filling out the Form 1116: For Line 1a
> "Gross income from sources within country shown", I entered
> either the gross dividends from foreign companies (on
> individual stocks) or the "Foreign Income After QDI Adj."
> reported by Mutual Funds.
>
> Form 1116 computes a credit of $93. I expect the $366
> credit. In general terms, Form 1116 computes the tax credit
> using the formula Foreign income/Gross income x Taxes on
> Form 1040, Line 44. [The gross Income is before Capital
> Loss Carryover.]
>
> Am I doing something wrong? Or that is generally the case
> (i.e. Form 1116 foreign tax credit is less that actual
> foreign taxes paid)? Or is it just the combination of
> factors in my case?
>
> If I am not doing something wrong; then I should reduce the
> tax credits to $300 and take the $300 credit without doing
> F1116. How do I get Turbotax to do that?
Without trying the claim through the forms, I will point out
that the FTC is only to grant you credit for those foreign
taxes you paid on the income to the extent that you had to
pay taxes on the same income in the United States. Since the
taxes paid are far in excess of the amount needed to be
paid, you were limited for your credit.
So it sounds like the software has done things right.
What country did you pay the taxes to? Most treaties limit
the amount that can be withheld and if so, you may be
entitled to a refund from the other country.
Tim Parris
US Tax Prep in Canada
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