Foreign Tax from Investments not crediting in full

[ea_rva aka acctgtaxmatters]

All of a sudden, in the last week or so the software is not taking full credit for foreign tax paid on investments...little amounts that always were credited 100% are being adjusted to partial credit with carryover. What am I missing??

[BobKamman]

Are you completing Form 1116, or just entering them on Schedule 3?  Are the amounts over 300/600?

[ea_rva aka acctgtaxmatters]

Form 1116 - linking from dividend income worksheet. I have always done it this way. Most of them are less than 300.

[BobKamman · Accepted solution]

I avoid the 1116 whenever possible.  It doesn't always allow the full amount of credit, because the foreign rate can be higher than the US rate.   You are probably just experiencing this now because the clients who show up this time of tax season are different from those who came earlier.  

If it's under the $300/$600 limit, just enter it directly on Schedule 3.  If it's over, but not by much, just claim the limit.  A year or so ago I had a client with $641 of foreign tax withheld on dividends, and I entered it without the 1116 just to see what would happen.  IRS reduced it to $600.  

[ea_rva aka acctgtaxmatters]

Worked! Thanks so much.

I still think something got updated to the software in the last week or so and it's throwing it off. Never had this issue in 6 years of using ProSeries. 

[BobKamman]

You can always look at the form and check the math.  The program does nothing but add, subtract, divide and multiply, according to the instructions.