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Entering income for the Foreign Tax Credit Form 1116 in ProSeries

by Intuit• Updated 3 months ago

This article will help you:

  • Enter foreign income and taxes paid on dividend
  • Enter foreign income and taxes paid on interest
  • Enter foreign income and taxes paid from Schedule K-1s

Before you start:

  • When creating a Form 1116, each form can have up to three countries, as indicated by columns.
  • If you have more then three countries you can create additional copies of the Form 1116.
  • Each Form 1116 can only have one category of income. If you have more then one category of income, use additional copies of the Form 1116. The categories are:
    • Passive,
    • General,
    • Section 901(j),
    • Certain income re-sourced by treaty,
    • Lump-sum distributions
  • If you have more then one copy of the Form 1116 the return isn't eligible for e-file and must be paper filed.
  1. Open the Schedule B.
  2. In the Dividend Income Smart Worksheet enter the payer name and any amounts from the 1099-DIV boxes 1, 2 and 3.
  3. Double-click on payer's name and select the Create button.
  4. Select Create if the worksheet doesn't already exist.
  5. Scroll down to section F Foreign tax information.
  6. Enter the Foreign taxes paid in U.S. dollars on line 1.
  7. Select the Foreign Country on line 2.
  8. On line 3, double-click in the link box to choose an already existing Form 1116, or enter a copy number to create a new one.
  9. Select the Link button.
  10. On line 4, checkbox A, B, or C to select which column of the Form 1116 to report the amounts.
  11. On line 5, choose whether taxes were Paid or Accrued.
  12. On line 6, enter the date.
  13. On line 7, enter the Total Ordinary dividends.
  1. Open the Schedule B.
  2. In the Interest Income Smart Worksheet enter the payer name and any amounts from the 1099-INT boxes 1, 2 and 3.
  3. Double-click on payer's name and select the Create button.
  4. Select Create if the worksheet doesn't already exist.
  5. Scroll down to section F Foreign tax information.
  6. Enter the Foreign taxes paid in U.S. dollars on line 1.
  7. Select the Foreign Country on line 2.
  8. On line 3, double-click in the link box to choose an already existing Form 1116, or enter a copy number to create a new one.
  9. Select the Link button.
  10. On line 4, checkbox A, B, or C to select which column of the Form 1116 to report the amounts.
  11. On line 5, choose whether taxes were Paid or Accrued.
  12. On line 6, enter the date.
  13. On line 7, enter the Total foreign source income.

For tax year 2021:

If the taxpayer or spouse received a K-3 from the business return, that will need to be entered into the individual return along with their K-1 information. To enter the K-3:

  1. Open the Schedule K-1 Worksheet.
  2. Scroll down to the Foreign Transactions line:
    • For partners, this is line 16.
    • For shareholders, this is line 14.
  3. Check the Schedule K-3 is attached if checked box.
  4. Enter the Name of Country or U.S. Possession.
  5. Complete lines B through AI based on the K-3 received.
  6. For lines marked with a * the data flow isn't provided for in the program and you'll need to manually enter any reportable amounts on the appropriate tax form.
  7. At the bottom of the table, select the QuickZoom to enter additional foreign tax information.
  8. The most common entries needed here will be the entries for Foreign taxes paid, and Foreign taxes accured.
    1. To generate the credit on Form 1116:
      1. On line 2 check box a.
      2. On line 3 double-click in the box and select the copy of the 1116 for these foreign taxes.
      3. Select the country column for Form 1116.
      4. Review the 1116.
    2. To claim a deduction for the foreign taxes:
      1. On line 2 check box b.
      2. On line 4 check box a or box b depending on if there is foreigned earned income from this activity reported on Form 2555.

Entering foreign taxes paid from Partnerships K-1's:

  1. Open the Schedule K-1 Worksheet Partner's Share of Income, Credits, Deductions, etc.
  2. Complete Part I, Part II, and Part III with the information from the K-1 received.
  3. On line 16, select the Name of country or U.S. possession.
  4. Enter Codes B-AI as shown on the K-1 received.
  5. Select the QuickZoom to enter additional foreign tax information.
  6. Scroll down to Box 16: Foreign transactions Code P, Q: Foreign taxes paid, Foreign taxes accrued.
  7. On line 1, enter the date.
  8. On line 2, choose whether taxes were Paid or Accrued.
  9. On line 3, double-click in the link box to choose an already existing Form 1116, or enter a copy number to create a new one.
  10. Select the Link button.
  11. On line 3, checkbox A, B, or C to select which column of the Form 1116 to report the amounts.
  12. Complete any other lines applicable to the transaction.

Entering foreign taxes paid from S-Corporation K-1's:

  1. Open the Schedule K-1 Worksheet Shareholder's Share of Income, Credits, Deductions, etc.
  2. Complete Part I, Part II, and Part III with the information from the K-1 received.
  3. On line 14, select the Name of country or U.S. possession.
  4. Enter Codes B-V as shown on the K-1 received.
  5. Select the QuickZoom to enter additional foreign tax information.
  6. Scroll down to Box 14: Foreign transactions Code P, Q: Foreign taxes paid, Foreign taxes accrued.
  7. On line 1, enter the date.
  8. On line 2, double-click in the link box to choose an already existing Form 1116, or enter a copy number to create a new one.
  9. Select the Link button.
  10. On line 2, checkbox A, B, or C to select which column of the Form 1116 to report the amounts.
  11. Complete any other lines applicable to the transaction.

Entering foreign taxes paid from Estate and Trust K-1's:

  1. Open the Schedule K-1 Worksheet - Estates And Trusts.
  2. Complete Part I, Part II, and Part III with the information from the K-1 received.
  3. On line 14, enter Code B with the amount of foreign taxes paid.
  4. Scroll down to Box 14, Code B: Foreign tax information section.
  5. On line 1, select the Name of country or U.S. possession.
  6. On line 2a, double-click in the link box to choose an already existing Form 1116, or enter a copy number to create a new one.
  7. Select the Link button.
  8. On line 2b, checkbox A, B, or C to select which column of the Form 1116 to report the amounts.
  9. On line 9, or 10 enter the Foreign taxes paid or accrued.
  10. On line 11, enter the date
  11. Complete any other lines applicable to the transaction.

Any Foreign Income not listed above will need to be entered on applicable income Form, Schedule or Worksheet as well as on the Foreign Tax Credit Computation Worksheet.

  1. Go to the top of Form 1116
  2. Select the QuickZoom for QuickZoom to copy of Form 1116,
  3. Choose the Create new copy option.
  4. Enter a copy number.
  5. Select Create.
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