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Author: mkt Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121435  
Subject: Foreign Tax Credit & form 1116 Date: 2/9/2009 12:54 PM
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I haven't received all our brokerage forms yet but it looks like we will exceed the $600 maximum, for married filing jointly, foreign tax credit. All the foreign taxes were paid by mutual funds and ETFs we own.

I have briefly looked at form 1116 and I really don't want to have to figure it out. Is it allowed to simply take the $600 maximum and forfeit any additional foreign tax credit? It simply wouldn't be worth all the work and frustration for less than $50 dollars in tax credit.

Thanks in advance.

MKT
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104400 of 121435
Subject: Re: Foreign Tax Credit & form 1116 Date: 2/9/2009 1:10 PM
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I haven't received all our brokerage forms yet but it looks like we will exceed the $600 maximum, for married filing jointly, foreign tax credit. All the foreign taxes were paid by mutual funds and ETFs we own.

I have briefly looked at form 1116 and I really don't want to have to figure it out. Is it allowed to simply take the $600 maximum and forfeit any additional foreign tax credit? It simply wouldn't be worth all the work and frustration for less than $50 dollars in tax credit.


No. You can't do what you propose. The foreign tax amount is subject to document matching by IRS computers, so you will get a letter requiring you to explain the discrepancy. Your only alternative to filling out Form 1116 is to claim the foreign taxes as an itemized deduction on Schedule A. No need to do any complex calculations, but the benefit is usually smaller than if you calculated the allowable tax credit.

Ira

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Author: mkt Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104401 of 121435
Subject: Re: Foreign Tax Credit & form 1116 Date: 2/9/2009 2:43 PM
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Ira,

Thanks for the information. The problem is that we are not itemizing this year. This is our year to use the standard deduction.

Does this mean we have to complete from 1116 this year? Is there any place on the web that works through a sample form other than the official IRS instructions for form 1116.

MKT

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104402 of 121435
Subject: Re: Foreign Tax Credit & form 1116 Date: 2/9/2009 2:59 PM
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Thanks for the information. The problem is that we are not itemizing this year. This is our year to use the standard deduction.

Does this mean we have to complete from 1116 this year? Is there any place on the web that works through a sample form other than the official IRS instructions for form 1116.


You can always choose to forgo the entire foreign tax credit. <g> I'm not aware of any website that works through an 1116, but I've never looked for one. Good luck.

Ira

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Author: mkt Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 104403 of 121435
Subject: Re: Foreign Tax Credit & form 1116 Date: 2/9/2009 3:00 PM
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Ira,

I just found this info when searching for instructions for form 1116.

https://www.dws-investments.com/EN/_img/tax-center/MC71847_T...

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FOREIGN INCOME
Shareholders completing Form 1116 for tax year 2008
are no longer required to report foreign income earned
and foreign taxes paid on a country-by-country basis.
To complete Part I of Form 1116, calculate your total
income from foreign sources paid by the Fund by
multiplying the amount in Box 1a of Form 1099-DIV
by the percentage found in the accompanying
Foreign Tax table.

To complete Part II of Form 1116, your total foreign
tax paid by the Fund is the amount shown in Box 6
of your Form 1099-DIV. If you have foreign source
qualified dividends (Box 1b of Form 1099-DIV
multiplied by the foreign income factor), you may be
required to make certain adjustments to your foreign
source income calculations before completing
IRS Form 1116. You do not need to use these tables
if you do not file IRS Form 1116.

FOREIGN TAX TABLE FOR 2008
Fund name Foreign income factor
DWS EAFE Equity Index Fund 98.51%
DWS Emerging Markets Equity Fund 100.00%
DWS Europe Equity Fund 95.03%
DWS Global Opportunities Fund 94.95%
DWS Global Thematic Fund 36.15%
DWS International Fund 95.66%
DWS International Select Equity Fund 98.07%
DWS International Value Opportunity Fund 59.25%
DWS Japan Equity Fund 27.22%
DWS Latin America Equity Fund 99.37%

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We do not hold these particular mutual funds but the commentary is useful. It seems to say that we do not have to break down each mutual fund by individual countries. Now if I can just find a similar table for our mutual funds (mostly Vanguard).

MKT

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