Hi guys! Do I still have to report a foreign source dividend in F 1116 even if no foreign taxes/paid for it?

Question

I received 4 dividends abroad. I paid taxes on the 3 items while none was paid for the other one. Do I still have to report it in my Form 1116 lines 1a and 3d? Hope somebody can help me. Thanks.

Answer 1

First, are you sure you even have to file a Form 1116.  If all of your foreign income was dividends and the total was under $300 ($600 if you are married), then you don't have to.  You can just report the amount of foreign tax paid directly on line 51 of form 1040.

If you do, it really doesn't matter if you include the income that  you didn't pay tax on because you are really only getting credit on the amount you paid taxes on.

By the way, check your state's handling of foreign tax paid.  In the state in which I live, we get to collect the credit on the federal and again on the state.  Yes, we get to legally double dip.  So if you pay $100 to England for taxes, you save $100 on the federal and another $100 on that state.  You can actually make money having as much foreign investment as possible!

Answer 2

Form 1116 goes by country.  If the dividends are all from the same country, include the 4th check even though you did not pay taxes on it.

Keep in mind that if all foreign taxes were reported on form 1099-DIV and the total is less than $300 ($600 if married), you do not need to do the form.  (I would start selling stock if I was just over the $300 mark--the form is a pain and let's say you paid $305 in foreign tax, you could end up with a $200 credit after you do the form....)