In March, I mailed my Federal return.
Last week, I received a letter from the IRS stating that I need
to provide them with a Form 1116, due to my foreign tax credit
claim exceeding $300 for the first time.
My general situation is:
- Foreign tax paid to Ireland deducted from my dividends on
some stock that I directly own.
- Foreign tax paid to various countries from dividend distributions
on a mutual fund in which I hold shares.
I struggled through a first pass and am convinced that I must
have made at least one error, since the amount of credit that
it allows is only about half of the foreign tax I paid. In
other words, if I'd paid $25 less in foreign taxes, I would
have been able to claim a credit of about $140 more.
The instructions for F1116 are, to put it charitably, less
than clear, so I can see many places that I could have made
mistakes. I have a lot of questions:
1. If I took the standard deduction, do I just put that on
Line 3a in both columns?
2. Should Line 3d be a repeat of Line 1a?
3. Is Line 3e my AGI?
4. The dividends on the stock that I own are paid quarterly,
as is common practice. Part II of F1116 requires me to give
dates for each payment, but only provides a single line for
each column in Part I. Can I lump the four payments and
call the date 2019, or do I need to do three of the four
quarterly payments on an attachment?
5. The text about the qualified dividends and capital gains
worksheet is especially confusing. Line 7 (of the w/s) is
indeed positive and Line 25 is less than Line 26. But, I
haven't made any adjustments on Line 1a (of F1116) or Line 5.
Does this mean that I don't have to redo the QD&CG worksheet?
6. If so, what does "the deduction for your exemption" (bottom
right of I1116, page 21) mean?
I had way too much withheld in 2019, so the difference between my
refund as originally submitted and with my (probably erroneous)
first attempt at F1116 is chump change. But, I don't want to
submit something wrong and draw things out further. I want to
just get this over with as quickly as possible, but correctly.
- posted 2 months ago