Foreign Tax Credit Job Aids from Publication 4012

The following job aids from the Volunteer Resource Guide, Tab G, Nonrefundable Credits, will help you determine if a taxpayer is eligible for the foreign tax credit and when Form 1116 is required to claim the credit:

• Nonrefundable Credits
• Form 1116 – Foreign Tax Credit

Foreign tax credit reported on Form 1099-INT, Form 1099-DIV, or Schedule K-1

Taxpayers who receive Form 1099-INT, Form 1099-DIV, or Schedule K-1 may have amounts indicating that foreign taxes have been paid on their behalf by the issuer of the document. Taxpayers can elect to report foreign tax on Form 1040, Schedule 3 without filing Form 1116 as long as the following conditions are met:

• All of the gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement).
• If the dividend income was from shares of stock, the taxpayer must have held those shares for at least 16 days.
• The taxpayer is not filing Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or excluding income from sources within Puerto Rico.
• The total of foreign taxes was not more than $300 (not more than $600 if married filing jointly).
• All foreign taxes were:
• Legally owed and not eligible for a refund, and
• Paid to countries that are recognized by the United States and do not support terrorism.

Taxpayers who must complete Form 1116 because they cannot qualify to claim the foreign tax credit without filing Form 1116 must be referred to a volunteer with an International certification or a professional tax preparer.