Foreign Tax Credit - TaxAct help

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Topic Author
Aguilar
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Foreign Tax Credit - TaxAct help

Post by Aguilar »

I have $402 in foreign taxes paid according to my 2020 1099-DIV.

I am doing my taxes in TaxAct and on Form 1116 I'm asked to input values here:

Foreign source other income including interest
$
Foreign source ordinary dividends
$
Foreign source qualified dividends
$
Foreign source capital gain dividends and capital gains
$
Type of income entered
Passive Inc

My 1099-DIV doesn't indicate anything that relates to these fields. It just shows the foreign tax paid amount for each dividend. Any idea what I'm supposed to enter in Form 1116?
livesoft
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Single, HoH, or MFJ?
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typical.investor
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

Aguilar wrote: Sat Apr 03, 2021 7:43 am I have $402 in foreign taxes paid according to my 2020 1099-DIV.

I am doing my taxes in TaxAct and on Form 1116 I'm asked to input values here:

Foreign source other income including interest
$
Foreign source ordinary dividends
$
Foreign source qualified dividends
$
Foreign source capital gain dividends and capital gains
$
Type of income entered
Passive Inc

My 1099-DIV doesn't indicate anything that relates to these fields. It just shows the foreign tax paid amount for each dividend. Any idea what I'm supposed to enter in Form 1116?
Don't you have a 2020 FORM 1099 COMPOSITE & YEAR-END SUMMARY?

My info on ordinary vs. qualified dividends is in the YEAR-END SUMMARY that isn't reported to the IRS and not on the 1099-DIV.

Just FYI, here the outline of mine.

FORM 1099 COMPOSITE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Form 1099-DIV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Form 1099-INT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Form 1099-OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Form 1099-B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
NotesforyourForm1099-B..................................... 15
YEAR-END SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Interest&Dividends............................................. 16
Detail Information of Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . 16
Detail Information of Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Realized Gain or (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Long-Term Realized Gain or (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Realized Gain or (Loss) Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Notes for Your Realized Gain or (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
AmortizationandAccretionforFixedIncome......................... 26
NotesforYourAmortizationandAccretionSection.................... 27
Supplemental Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
ForeignTaxPaidandIncomeSummary............................ 28
Cost Basis Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Terms and Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Topic Author
Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

livesoft wrote: Sat Apr 03, 2021 8:03 am Single, HoH, or MFJ?
MFI (we are separated)
livesoft
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Generally on a fund sponsor's web site (and often sent to you) is information that you require. You did not name the fund(s) that paid foreign taxes which would be helpful to responders.

For instance, Vanguard.com has https://advisors.vanguard.com/iwe/pdf/t ... 012021.pdf

Also the instructions to Form 1116 should be read. Hint: cross out the parts of the Instructions that do NOT apply to you first and only read the short bits that do apply to you.

Some tax-prep software is better than others for this form, too. I use HRBlock and it does a great job with its questions, but I have been filling out Form 1116 for decades.
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Topic Author
Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

typical.investor wrote: Sat Apr 03, 2021 8:18 am
Aguilar wrote: Sat Apr 03, 2021 7:43 am I have $402 in foreign taxes paid according to my 2020 1099-DIV.

I am doing my taxes in TaxAct and on Form 1116 I'm asked to input values here:

Foreign source other income including interest
$
Foreign source ordinary dividends
$
Foreign source qualified dividends
$
Foreign source capital gain dividends and capital gains
$
Type of income entered
Passive Inc

My 1099-DIV doesn't indicate anything that relates to these fields. It just shows the foreign tax paid amount for each dividend. Any idea what I'm supposed to enter in Form 1116?
Don't you have a 2020 FORM 1099 COMPOSITE & YEAR-END SUMMARY?

My info on ordinary vs. qualified dividends is in the YEAR-END SUMMARY that isn't reported to the IRS and not on the 1099-DIV.
I have a doc from ETRADE that indicates whether each dividend that had foreign taxes paid was qualified or nonqualified. It doesn't say anything else that's relevant to form 1116 so I'm not sure what to do with form 1116.

The funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
livesoft
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Joined: Thu Mar 01, 2007 7:00 pm

Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Aguilar wrote: Sat Apr 03, 2021 8:41 amThe funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
The PDF I linked along with your 1099-DIV will allow you to calculate the numbers that TaxAct is asking for.

Also reading some other recent threads on the same subject may be helpful. For instance, viewtopic.php?t=342437
Last edited by livesoft on Sat Apr 03, 2021 8:48 am, edited 1 time in total.
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typical.investor
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

Aguilar wrote: Sat Apr 03, 2021 8:41 am
typical.investor wrote: Sat Apr 03, 2021 8:18 am
Aguilar wrote: Sat Apr 03, 2021 7:43 am I have $402 in foreign taxes paid according to my 2020 1099-DIV.

I am doing my taxes in TaxAct and on Form 1116 I'm asked to input values here:

Foreign source other income including interest
$
Foreign source ordinary dividends
$
Foreign source qualified dividends
$
Foreign source capital gain dividends and capital gains
$
Type of income entered
Passive Inc

My 1099-DIV doesn't indicate anything that relates to these fields. It just shows the foreign tax paid amount for each dividend. Any idea what I'm supposed to enter in Form 1116?
Don't you have a 2020 FORM 1099 COMPOSITE & YEAR-END SUMMARY?

My info on ordinary vs. qualified dividends is in the YEAR-END SUMMARY that isn't reported to the IRS and not on the 1099-DIV.
I have a doc from ETRADE that indicates whether each dividend that had foreign taxes paid was qualified or nonqualified. It doesn't say anything else that's relevant to form 1116 so I'm not sure what to do with form 1116.

The funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
Foreign source other income including interest
$ probably zero as you didn't have income other than dividends right?

Foreign source ordinary dividends
$ You have this info you said

Foreign source qualified dividends
$ You have this info you said

Foreign source capital gain dividends and capital gains
$ (likely zero as your funds didn't issue any)

Type of income entered
Passive (dividends right)

What else do you need to know? I don't know why you'd need to calculate anything else.
Topic Author
Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

typical.investor wrote: Sat Apr 03, 2021 8:47 am
Aguilar wrote: Sat Apr 03, 2021 8:41 am
typical.investor wrote: Sat Apr 03, 2021 8:18 am
Aguilar wrote: Sat Apr 03, 2021 7:43 am I have $402 in foreign taxes paid according to my 2020 1099-DIV.

I am doing my taxes in TaxAct and on Form 1116 I'm asked to input values here:

Foreign source other income including interest
$
Foreign source ordinary dividends
$
Foreign source qualified dividends
$
Foreign source capital gain dividends and capital gains
$
Type of income entered
Passive Inc

My 1099-DIV doesn't indicate anything that relates to these fields. It just shows the foreign tax paid amount for each dividend. Any idea what I'm supposed to enter in Form 1116?
Don't you have a 2020 FORM 1099 COMPOSITE & YEAR-END SUMMARY?

My info on ordinary vs. qualified dividends is in the YEAR-END SUMMARY that isn't reported to the IRS and not on the 1099-DIV.
I have a doc from ETRADE that indicates whether each dividend that had foreign taxes paid was qualified or nonqualified. It doesn't say anything else that's relevant to form 1116 so I'm not sure what to do with form 1116.

The funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
Foreign source other income including interest
$ probably zero as you didn't have income other than dividends right?

Foreign source ordinary dividends
$ You have this info you said

Foreign source qualified dividends
$ You have this info you said

Foreign source capital gain dividends and capital gains
$ (likely zero as your funds didn't issue any)

Type of income entered
Passive (dividends right)

What else do you need to know? I don't know why you'd need to calculate anything else.
Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
cas
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Re: Foreign Tax Credit - TaxAct help

Post by cas »

In addition to the pdf that livesoft linked, the relevant Vanguard Tax Center page for investors (as opposed to advisors) has this additional paragraph giving instructions on how to use the worksheet, combined with the 1099-DIV:
Foreign tax credit information

View foreign tax credit information for applicable Vanguard ETFs® and mutual funds. To calculate the amount of foreign income and QDI-eligible foreign income, take the amount of Foreign Tax Paid (box 7 of IRS Form 1099-DIV) and multiply it by the factors under Foreign income and QDI-eligible foreign income in the information sheet. For example, if Form 1099-DIV reported $500 of foreign tax paid in box 7 for FTSE Developed Markets (VEA), the foreign income would equal $6,657.58 ($500 x 13.31516) and the QDI-eligible foreign income would equal $5,340.53 ($500 x 10.68106).
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typical.investor
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

Aguilar wrote: Sat Apr 03, 2021 8:52 am
typical.investor wrote: Sat Apr 03, 2021 8:47 am
Aguilar wrote: Sat Apr 03, 2021 8:41 am
typical.investor wrote: Sat Apr 03, 2021 8:18 am
Aguilar wrote: Sat Apr 03, 2021 7:43 am I have $402 in foreign taxes paid according to my 2020 1099-DIV.

I am doing my taxes in TaxAct and on Form 1116 I'm asked to input values here:

Foreign source other income including interest
$
Foreign source ordinary dividends
$
Foreign source qualified dividends
$
Foreign source capital gain dividends and capital gains
$
Type of income entered
Passive Inc

My 1099-DIV doesn't indicate anything that relates to these fields. It just shows the foreign tax paid amount for each dividend. Any idea what I'm supposed to enter in Form 1116?
Don't you have a 2020 FORM 1099 COMPOSITE & YEAR-END SUMMARY?

My info on ordinary vs. qualified dividends is in the YEAR-END SUMMARY that isn't reported to the IRS and not on the 1099-DIV.
I have a doc from ETRADE that indicates whether each dividend that had foreign taxes paid was qualified or nonqualified. It doesn't say anything else that's relevant to form 1116 so I'm not sure what to do with form 1116.

The funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
Foreign source other income including interest
$ probably zero as you didn't have income other than dividends right?

Foreign source ordinary dividends
$ You have this info you said

Foreign source qualified dividends
$ You have this info you said

Foreign source capital gain dividends and capital gains
$ (likely zero as your funds didn't issue any)

Type of income entered
Passive (dividends right)

What else do you need to know? I don't know why you'd need to calculate anything else.
Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
My understanding is that ordinary dividends included both qualified and nonqualified.

So I'd put the total dividend amount (qualified + nonqualified) for ordinary dividends and the sum of the nonqualified dividends for nonqualified.
livesoft
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Aguilar wrote: Sat Apr 03, 2021 8:52 am Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
You may be going off on a tangent. The PDF I linked tells you exactly what you need to know. Foreign source ordinary dividends are like US dividends: There are ordinary qualified dividends and ordinary nonqualified dividends. Ordinary dividends are the sum of both these types. Your funds may have 100% of their dividends as foreign source or 99% or 98% or some other number. This percentage is easily found out by reading the PDF. For instance, if your fund had 50% foreign source dividneds and paid $1000 in dividends, then $500 would be foreign source dividends with presumably the other $500 US source dividends.
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typical.investor
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

livesoft wrote: Sat Apr 03, 2021 9:01 am
Aguilar wrote: Sat Apr 03, 2021 8:52 am Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
You may be going off on a tangent.
No, it's not a tagent.
livesoft wrote: Sat Apr 03, 2021 9:01 amThe PDF I linked tells you exactly what you need to know.
So does the info from ETRADE.
livesoft wrote: Sat Apr 03, 2021 9:01 amForeign source ordinary dividends are like US dividends: There are ordinary qualified dividends and ordinary nonqualified dividends. Ordinary dividends are the sum of both these types.
That's exactly what I said.
livesoft wrote: Sat Apr 03, 2021 9:01 am Your funds may have 100% of their dividends as foreign source or 99% or 98% or some other number. This percentage is easily found out by reading the PDF. For instance, if your fund had 50% foreign source dividneds and paid $1000 in dividends, then $500 would be foreign source dividends with presumably the other $500 US source dividends.
Sure that's true and fine and all that, but doesn't answer what tax act is asking for:

Foreign source ordinary dividends
$
Foreign source qualified dividends
$

The info from ETRADE tells you. All you need to do is add up the amounts in each category for your foreign funds.
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Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

typical.investor wrote: Sat Apr 03, 2021 8:58 am
Aguilar wrote: Sat Apr 03, 2021 8:52 am
typical.investor wrote: Sat Apr 03, 2021 8:47 am
Aguilar wrote: Sat Apr 03, 2021 8:41 am
typical.investor wrote: Sat Apr 03, 2021 8:18 am

Don't you have a 2020 FORM 1099 COMPOSITE & YEAR-END SUMMARY?

My info on ordinary vs. qualified dividends is in the YEAR-END SUMMARY that isn't reported to the IRS and not on the 1099-DIV.
I have a doc from ETRADE that indicates whether each dividend that had foreign taxes paid was qualified or nonqualified. It doesn't say anything else that's relevant to form 1116 so I'm not sure what to do with form 1116.

The funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
Foreign source other income including interest
$ probably zero as you didn't have income other than dividends right?

Foreign source ordinary dividends
$ You have this info you said

Foreign source qualified dividends
$ You have this info you said

Foreign source capital gain dividends and capital gains
$ (likely zero as your funds didn't issue any)

Type of income entered
Passive (dividends right)

What else do you need to know? I don't know why you'd need to calculate anything else.
Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
My understanding is that ordinary dividends included both qualified and nonqualified.

So I'd put the total dividend amount (qualified + nonqualified) for ordinary dividends and the sum of the nonqualified dividends for nonqualified.
OK, I did that for the first page of Form 1116.

Foreign source other income including interest: blank
Foreign source ordinary dividends: 402
Foreign source qualified dividends: 295
Foreign source capital gain dividends and capital gains: blank
Type of income entered: passive
(check) Check if this foreign income is from a 1099 or similar form

The next page asks for all this, which I'm stumped about.

Foreign Tax Credit - Manual Entry - Foreign Currency
Entries were made for this worksheet for ETRADE for income or other items in Various. You need enter the foreign taxes if any foreign taxes were paid. These entries must be made in foreign currency. Also explain the conversion from foreign currency to U.S. dollars.

Taxes withheld at the source on dividends
Taxes withheld at the source on rents and royalties
Taxes withheld at the source on interest
Other foreign taxes paid or accrued
Check if this foreign income is from a 1099 or similar form
Check here if this foreign income is from a Schedule K-1
Check here if this foreign income is from a mutual fund or other regulated investment company
Explain conversion
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typical.investor
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

Aguilar wrote: Sat Apr 03, 2021 9:10 am
typical.investor wrote: Sat Apr 03, 2021 8:58 am
Aguilar wrote: Sat Apr 03, 2021 8:52 am
typical.investor wrote: Sat Apr 03, 2021 8:47 am
Aguilar wrote: Sat Apr 03, 2021 8:41 am

I have a doc from ETRADE that indicates whether each dividend that had foreign taxes paid was qualified or nonqualified. It doesn't say anything else that's relevant to form 1116 so I'm not sure what to do with form 1116.

The funds that had foreign taxes paid are Vanguard Total Stock Intl Admiral and Vanguard FTSE All World Ex US. Foreign taxes add up to $402.
Foreign source other income including interest
$ probably zero as you didn't have income other than dividends right?

Foreign source ordinary dividends
$ You have this info you said

Foreign source qualified dividends
$ You have this info you said

Foreign source capital gain dividends and capital gains
$ (likely zero as your funds didn't issue any)

Type of income entered
Passive (dividends right)

What else do you need to know? I don't know why you'd need to calculate anything else.
Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
My understanding is that ordinary dividends included both qualified and nonqualified.

So I'd put the total dividend amount (qualified + nonqualified) for ordinary dividends and the sum of the nonqualified dividends for nonqualified.
OK, I did that for the first page of Form 1116. I The next page asks for all this, which I'm stumped about.

Foreign Tax Credit - Manual Entry - Foreign Currency
Entries were made for this worksheet for ETRADE for income or other items in Various. You need enter the foreign taxes if any foreign taxes were paid. These entries must be made in foreign currency. Also explain the conversion from foreign currency to U.S. dollars.

Taxes withheld at the source on dividends
Taxes withheld at the source on rents and royalties
Taxes withheld at the source on interest
Other foreign taxes paid or accrued
Check if this foreign income is from a 1099 or similar form
Check here if this foreign income is from a Schedule K-1
Check here if this foreign income is from a mutual fund or other regulated investment company
Explain conversion
It seems pretty straightforward except for the currency conversion which you don't really know because that's how it was reported to you. I would answer:

Taxes withheld at the source on dividends
$402
Taxes withheld at the source on rents and royalties
$0
Taxes withheld at the source on interest
$0
Other foreign taxes paid or accrued
$0
Check if this foreign income is from a 1099 or similar form
yes
Check here if this foreign income is from a Schedule K-1
no
Check here if this foreign income is from a mutual fund or other regulated investment company
yes
Explain conversion
"These are the amounts reported to me in the tax documents provided by my broker ETRADE. I am not sure what exchange rate the funds used to report these amounts to ETRADE". [or some such similar explanation]
Topic Author
Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

typical.investor wrote: Sat Apr 03, 2021 9:16 am
Aguilar wrote: Sat Apr 03, 2021 9:10 am
typical.investor wrote: Sat Apr 03, 2021 8:58 am
Aguilar wrote: Sat Apr 03, 2021 8:52 am
typical.investor wrote: Sat Apr 03, 2021 8:47 am

Foreign source other income including interest
$ probably zero as you didn't have income other than dividends right?

Foreign source ordinary dividends
$ You have this info you said

Foreign source qualified dividends
$ You have this info you said

Foreign source capital gain dividends and capital gains
$ (likely zero as your funds didn't issue any)

Type of income entered
Passive (dividends right)

What else do you need to know? I don't know why you'd need to calculate anything else.
Foreign source ordinary dividends - the sheet from ETRADE doesn't indicate this. It indicates whether the div is qualified or nonqualified. The TaxAct form asks for foreign source ordinary dividends, not nonqualified dividends. Are they the same thing?
My understanding is that ordinary dividends included both qualified and nonqualified.

So I'd put the total dividend amount (qualified + nonqualified) for ordinary dividends and the sum of the nonqualified dividends for nonqualified.
OK, I did that for the first page of Form 1116. I The next page asks for all this, which I'm stumped about.

Foreign Tax Credit - Manual Entry - Foreign Currency
Entries were made for this worksheet for ETRADE for income or other items in Various. You need enter the foreign taxes if any foreign taxes were paid. These entries must be made in foreign currency. Also explain the conversion from foreign currency to U.S. dollars.

Taxes withheld at the source on dividends
Taxes withheld at the source on rents and royalties
Taxes withheld at the source on interest
Other foreign taxes paid or accrued
Check if this foreign income is from a 1099 or similar form
Check here if this foreign income is from a Schedule K-1
Check here if this foreign income is from a mutual fund or other regulated investment company
Explain conversion
It seems pretty straightforward except for the currency conversion which you don't really know because that's how it was reported to you. I would answer:

Taxes withheld at the source on dividends
$402
Taxes withheld at the source on rents and royalties
$0
Taxes withheld at the source on interest
$0
Other foreign taxes paid or accrued
$0
Check if this foreign income is from a 1099 or similar form
yes
Check here if this foreign income is from a Schedule K-1
no
Check here if this foreign income is from a mutual fund or other regulated investment company
yes
Explain conversion
"These are the amounts reported to me in the tax documents provided by my broker ETRADE. I am not sure what exchange rate the funds used to report these amounts to ETRADE". [or some such similar explanation]
Thanks, I did that, and there's another page:

Foreign Tax Credit - Manual Entry - Income, Interest, Foreign Losses
Enter the requested amounts below. Foreign gross income was calculated based on the income entries made earlier. This will be used in the calculation of foreign gross income for this income category on Form 1116. The country is Various.

The name of the related organization is ETRADE.

Gross foreign source income for this worksheet, country and income category
Regular Tax
$
402
AMT
$

Other interest expense for line 4b of Form 1116 for this country and income category from Schedule K-1
Regular Tax
$

Other interest expense for line 4b of Form 1116 for this country and income category not from Schedule K-1
Regular Tax
$

Other interest expense for line 4b of AMT Form 1116 for this country and income category
AMT
$

Losses from foreign sources for line 5 of Form 1116 for this country and income category
Regular Tax
$
AMT
$

Right now, in the Credits section of TaxAct, it shows $47 foreign tax credit now. It was $0 before. Aim is to get it to $402.
livesoft
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

My Form 1116 states that the country is "RIC" as per the Form 1116 Instructions p 15. That is, I do not believe it should be "Various." With RIC all the questions about currency conversion should disappear I would think.

You might look at the Form 1116 produced by your tax-prep software and not just look at the questions and answers you have given.
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typical.investor
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

livesoft wrote: Sat Apr 03, 2021 9:36 am My Form 1116 states that the country is "RIC" as per the Form 1116 Instructions p 15. That is, I do not believe it should be "Various." With RIC all the questions about currency conversion should disappear I would think.

You might look at the Form 1116 produced by your tax-prep software and not just look at the questions and answers you have given.
Yeah try that. I have never been asked for questions about currency conversion in TurboTax and use RIC.
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Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

typical.investor wrote: Sat Apr 03, 2021 9:44 am
livesoft wrote: Sat Apr 03, 2021 9:36 am My Form 1116 states that the country is "RIC" as per the Form 1116 Instructions p 15. That is, I do not believe it should be "Various." With RIC all the questions about currency conversion should disappear I would think.

You might look at the Form 1116 produced by your tax-prep software and not just look at the questions and answers you have given.
Yeah try that. I have never been asked for questions about currency conversion in TurboTax and use RIC.
TaxAct doesn't let me see the actual forms. From the form library it sends me straight to the Q&A for form 1116.
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

Aguilar wrote: Sat Apr 03, 2021 9:31 am Right now, in the Credits section of TaxAct, it shows $47 foreign tax credit now. It was $0 before. Aim is to get it to $402.
I don't know what to say. I think you have done it correctly.

I always have an unused foreign tax credit carryover, so that result isn't unexpected to me. I'm an expat and so have a different tax situation so am not sure what yours should be.

Can you see the computed form 1116? I mean if you try to print out your return, it'll show it won't it?

Anyway, mine takes foreign income/AGI to derive a percent that is multiplied by foreign taxes paid to get my credit. I have protested I don't like it, but people say it's to allocate some of my deduction to foreign income and results in not being able to claim the whole credit.
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Aguilar wrote: Sat Apr 03, 2021 9:51 amTaxAct doesn't let me see the actual forms. From the form library it sends me straight to the Q&A for form 1116.
I would change my answers to TaxAct until the country was not "Various" and was "RIC" or "Regulated Investment Company" instead.
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Aguilar
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

livesoft wrote: Sat Apr 03, 2021 9:56 am
Aguilar wrote: Sat Apr 03, 2021 9:51 amTaxAct doesn't let me see the actual forms. From the form library it sends me straight to the Q&A for form 1116.
I would change my answers to TaxAct until the country was not "Various" and was "RIC" or "Regulated Investment Company" instead.
I printed my taxes and form 1116 says RIC. I guess Various is the field value TaxAct uses for RIC. Still only see $47 in foreign tax credit. No idea what I've done incorrectly. In the past I had paperwork from Vanguard and it was easier, and I got FTC for the entire amount of foreign taxes paid.
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Re: Foreign Tax Credit - TaxAct help

Post by neurosphere »

Aguilar wrote: Sat Apr 03, 2021 10:19 am
livesoft wrote: Sat Apr 03, 2021 9:56 am
Aguilar wrote: Sat Apr 03, 2021 9:51 amTaxAct doesn't let me see the actual forms. From the form library it sends me straight to the Q&A for form 1116.
I would change my answers to TaxAct until the country was not "Various" and was "RIC" or "Regulated Investment Company" instead.
I printed my taxes and form 1116 says RIC. I guess Various is the field value TaxAct uses for RIC. Still only see $47 in foreign tax credit. No idea what I've done incorrectly. In the past I had paperwork from Vanguard and it was easier, and I got FTC for the entire amount of foreign taxes paid.
In taxact there is a worksheet which feeds the 1116. The worksheet is used to enter each source of foreign tax/income. The worksheet has a checkbox to state whether the source of tax/income you are currently entering (e.g. from the Vanguard 1099) is a mutual fund aka RIC. It ALSO asks for the country of origin for which you can answer "various" on the same worksheet. But only "RIC" is listed on the actual 1116 in Part I.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Aguilar wrote: Sat Apr 03, 2021 10:19 amI printed my taxes and form 1116 says RIC. I guess Various is the field value TaxAct uses for RIC. Still only see $47 in foreign tax credit. No idea what I've done incorrectly. In the past I had paperwork from Vanguard and it was easier, and I got FTC for the entire amount of foreign taxes paid.
Earlier in this thread you noted: $402 for the gross foreign source income I think. That's not correct because $402 was the foreign tax paid. Your gross foreign source income would be closer to $5000 I would think. Your Foreign qualified dividend income would be closer to about 73% to 80% of that number.

Did you actually read through the PDF linked from Vanguard or are you just winging it?

Here is a screen capture of what another brokerage firm provides its clients to help them with their US tax return:

Image

This information comes from the PDF that I linked, but the brokerage firm figured it out and provided it. It is NOT on the 1099-DIV. It might match a 1099-DIV if the dividend was 100% foreign source income, but that would not always be the case especially if one held non-international equity funds or the held international funds that had US-source income such as from the cash held in their assets.
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Re: Foreign Tax Credit - TaxAct help

Post by typical.investor »

livesoft wrote: Sat Apr 03, 2021 10:37 am
Aguilar wrote: Sat Apr 03, 2021 10:19 amI printed my taxes and form 1116 says RIC. I guess Various is the field value TaxAct uses for RIC. Still only see $47 in foreign tax credit. No idea what I've done incorrectly. In the past I had paperwork from Vanguard and it was easier, and I got FTC for the entire amount of foreign taxes paid.
Earlier in this thread you noted: $402 for the gross foreign source income I think. That's not correct because $402 was the foreign tax paid. Your gross foreign source income would be closer to $5000 I would think. Your Foreign qualified dividend income would be closer to about 73% to 80% of that number.

Did you actually read through the PDF linked from Vanguard or are you just winging it?

Here is a screen capture of what another brokerage firm provides its clients to help them with their US tax return:

Image

This information comes from the PDF that I linked, but the brokerage firm figured it out and provided it. It is NOT on the 1099-DIV.
I still don’t think you need the Vanguard pdf but livesoft is right.

Surely your gross foreign source income is wrong, or are you really paying a 100% foreign tax rate?

Look at form 1116 and the worksheets it prepared to see how they are calculating it?
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

typical.investor wrote: Sat Apr 03, 2021 10:46 amI still don’t think you need the Vanguard pdf but livesoft is right.
This is true for 2020 since both the Vanguard Total International and the Vanguard FTSE all-world foreign large-cap fund had 100% of their dividends as foreign source for 2020 as stated in the PDF. This is not always true. For instance the Vanguard FTSE all-world foreign small-cap fund did NOT have 100% of its dividends as foreign source for 2020.
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

livesoft wrote: Sat Apr 03, 2021 10:37 am
Aguilar wrote: Sat Apr 03, 2021 10:19 amI printed my taxes and form 1116 says RIC. I guess Various is the field value TaxAct uses for RIC. Still only see $47 in foreign tax credit. No idea what I've done incorrectly. In the past I had paperwork from Vanguard and it was easier, and I got FTC for the entire amount of foreign taxes paid.
Earlier in this thread you noted: $402 for the gross foreign source income I think. That's not correct because $402 was the foreign tax paid. Your gross foreign source income would be closer to $5000 I would think. Your Foreign qualified dividend income would be closer to about 73% to 80% of that number.

Did you actually read through the PDF linked from Vanguard or are you just winging it?

Here is a screen capture of what another brokerage firm provides its clients to help them with their US tax return:

Image

This information comes from the PDF that I linked, but the brokerage firm figured it out and provided it. It is NOT on the 1099-DIV. It might match a 1099-DIV if the dividend was 100% foreign source income, but that would not always be the case especially if one held non-international equity funds or the held international funds that had US-source income such as from the cash held in their assets.
Thanks for your help. I had that value at 0 before.

I think I solved the issue now but I don't know if my form 1116 is set up correctly. Let me explain...

I paid foreign taxes for VTIAX and FTSE All World Ex-US, like I mentioned before. My TaxAct entry for form 1116 came prepopulated with a single entry. I set up that entry with the company listed as ETRADE and aggregated the foreign tax data for VTIAX and FTSE All World EX-US. This is what I was working on before on this thread.

I just took the $402 (the foreign tax paid) X 11.70097 (from the PDF, for VTIAX) which equals 4703.79 and inputted that value in the foreign source income field in Form 1116, and now the FTC appears correctly at $402 in TaxAct. Success.

Is this an acceptable way to do it? Cause the reality is, some of the $402 is from FTSE All World Ex-US which has a different value in the PDF: 11.85460.

If the way I did it, with one form entry, is wrong, am I supposed to have two entries: one for VTIAX and another for FTSE All World Ex-US?
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

You are supposed to make calculations, sum them up, and put the sum on one form 1116 for all your RIC (i.e. all your mutual funds and ETFs). It reads like E*Trade did the sums for you, but you are lucky that both funds have 100% foreign source dividend income.

i am flabbergasted and out of this thread.
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Re: Foreign Tax Credit - TaxAct help

Post by Aguilar »

livesoft wrote: Sat Apr 03, 2021 11:21 am You are supposed to make calculations, sum them up, and put the sum on one form 1116 for all your RIC (i.e. all your mutual funds and ETFs). It reads like E*Trade did the sums for you, but you are lucky that both funds have 100% foreign source dividend income.

i am flabbergasted and out of this thread.
Sorry, that makes sense. I just went thru the calculations for the two securities using the PDF, and the foreign source income is 4562.746. I entered this value into the foreign source income field in TaxAct and the FTC remains at $402. Same outcome, correct method this time. I think I did it right, finally.

Math:

foreign source income: 
(VTIAX) 44.793025 x 11.70097 = 524.12184173425
(FTSE)  340.68 x 11.85460 = 4038.625128
Total foreign source income: 4038.625128 + 524.12184173425 = $4562.74696973425
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Re: Foreign Tax Credit - TaxAct help

Post by livesoft »

Your 1099-DIV should have the total dividends paid by these two funds in 2020 to be within pennies of $4562.75. I would use the 1099-DIV number myself since 100% of the dividends from these two funds were foreign source dividends.
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