Something New?

[SueBaby]

Almost every 1099-B has a red flag on my computer saying answer question about foreign taxes. Now I have one that DOES have foreign tax; only $29. Does it need a form 1116 and is it passive? If it is for a kid do I even have to file it? This is for a dividend.

This year it is different and I haven't seen this on a Sch B before. Almost all I have are that way. Thanks

[Possi]

Not new

That is not new on my program. I always have to address it.
Yours can go on the return without the 1116. I plug mine straight on Line 47 when the 1116 is not required.

[SueBaby]

That is not new on my program. I always have to address it.
Yours can go on the return without the 1116. I plug mine straight on Line 47 when the 1116 is not required.

Thank you Possi: I thought I had to do extra work with this since I haven't seen anyone with foreign tax before; only income interest and dividends. Thanks again.

[Possi]

Ttb 11-11

Almost every 1099-B has a red flag on my computer saying answer question about foreign taxes. Now I have one that DOES have foreign tax; only $29. Does it need a form 1116 and is it passive? If it is for a kid do I even have to file it? This is for a dividend.

This year it is different and I haven't seen this on a Sch B before. Almost all I have are that way. Thanks

I just had my first Foreign tax paid this year, and with your thread I looked it up again. The criteria for electing NOT to use the 1116 are on TTB 11-11.

I haven't had a return yet that demanded the form, but I have used the form in the past.

=)

~donna aka possi

[S T]

Computer Message

I am receiving a message as well on my computer software, but it is slightly different than posted earlier. I also rarely complete the Form 1116 and just enter as Foreign Tax Credit in my Schedule B information.

My message is: "Review-Federal Form TD F90-22.1. This return has a foreign tax credit or Form 2555 or both. Review Schedule B, Part III, and the related form instructions to ensure that the correct responses are provided"

Relates to the questions, which are most always checked NO. Shouldn't these questions still be checked NO, due to the fact that the foreign tax credit is being generated through an investment brokerage account. T/p usually does not have a signature or authority over the financial account in a foreign country.

Seems confusing!

Sandy

[JG EA]

Sandy, I was actually going to post this question tonight. Does the Foreign Account question apply when through a broker? Are you saying no to this I hope?

[taxmom34]

i used turbotax last year and a few clients received 1099DIV with foreign tax paid , well , some of these client itemized and that's where the foreign tax went as other taxes.

[taxmom34]

add info

for the question on schedule B, my understanding is that is you have an account of 10,000 or less you answer no. so i figured if you paid foreign tax of $5 or $25 i don't think you have 10,000 in your account. does that sound reasonable?

[S T]

I am

Yes, JG, I am hoping the answer is no.

I read the Instructions for Schedule B and this is what it says

Lines 7a and 7b
Foreign Accounts Line 7a Check the “Yes” box on line 7a if either (1) or (2) below applies.
1. You own more than 50% of the stock in any corporation that owns one or more
foreign bank accounts.
2. At any time during 2008 you had an interest in or signature or other authority
over a financial account in a foreign country (such as a bank account, securities ac-
count, or other financial account).
For line 7a, item (2) does not apply to foreign securities held in a U.S. securities account.
TIP
Exceptions. Check the “No” box if any of the following applies to you.
• The combined value of the accounts was $10,000 or less during the whole year.
• The accounts were with a U.S. military banking facility operated by a U.S. financial institution.
• You were an officer or employee of a commercial bank that is supervised by the
Comptroller of the Currency, the Board of Governors of the Federal Reserve System,
or the Federal Deposit Insurance Corporation; the account was in your employer’s
name; and you did not have a personal financial interest in the account.
• You were an officer or employee of a domestic corporation with securities listed
on national securities exchanges or with assets of more than $10 million and 500 or
more shareholders of record; the account was in your employer’s name; you did not
have a personal financial interest in the account; and the corporation’s chief financial
officer has given you written notice that the corporation has filed a current report that
includes the account.
See Form TD F 90-22.1 to find out if you are considered to have an interest in or
signature or other authority over a financial account in a foreign country (such as a bank
account, securities account, or other financial account). You can get Form TD F
90-22.1 by visiting the IRS website at www.irs.gov/pub/irs-pdf/f90221.pdf.
If you checked the “Yes” box on line 7a, file Form TD F 90-22.1 by June 30, 2009,
with the Department of the Treasury at the address shown on that form. Do not attach
it to Form 1040.
If you are required to file Form TD F 90-22.1 but do not do so, you may have to pay a penalty of up to $10,000 (more in some cases).

I am hoping that this part applies to what we are doing with t/p's that have investment brokerage accounts For line 7a, item (2) does not apply to foreign securities held in a U.S. securities account

[rgtaxservice]

i used turbotax last year and a few clients received 1099DIV with foreign tax paid , well , some of these client itemized and that's where the foreign tax went as other taxes.

You would probably been better off taking it as a credit instead of a deduction.

[joanmcq]

If it is just foreign tax paid because he has the XYZ Global Fund in his Schwab account or whatever, no, you do not answer that question on the Sch B yes, nor do you fill out the TD F90-22. If the foreign tax is less than $500, you don't have to do the 1116. And it is almost ALWAYS better to take the credit than the deduction.

[RitaB]

I think...

If the foreign tax is less than $500, you don't have to do the 1116.

...it's 300 for single, 600 for MFJ. Course, my brain is not really at the top of its game right now.

[JohnH]

Off the top of my head, I'm wondering if the increase on foreign tax payments in many mutual funds may be a side consequence of the financial meltdown last fall. As fund managers were forced to sell anything they could in order to meet redemption demands, they had to sell foreign investments they would have preferred to keep in their portfolios, thus triggering larger than normal foreign tax liabilities. Maybe someone more knowledgeable about this can set me straight if I'm off base.

As for the TD F90-22.1, it would not normally come into play unless the individual has a financial interest or signatory control over an account in a foreign bank and the individual's amount is over the $10K limit (as has already been stated). I'm curious to know whether I'm doing the right thing about this form. I only have 3 clients who fall into this category, and I simply mail them the TD F90-22.1 with their name, address, & SocSec# , but I don't answer any of the questions. I tell them to fill it out and send it in tot he Detroit address. The penalties for this thing are so great that I don't want to have anything to do with it beyond the basic clerical stuff. How do others who have clients in this category handle it?