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:
- If I took the standard deduction, do I just put that on Line 3a in both columns?
- Should Line 3d be a repeat of Line 1a?
- Is Line 3e my AGI?
- 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?
- 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?
- 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.