form 1116

Old Jul 21st 2019, 7:40 pm
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Default form 1116

Examining the tax preparer's tax return they have completed for me ( US person here - so need to file both uk and usa) ......a bit puzzled by the appearance of a form 1116 claim for shares dividends I received {around 100 gbp} I was under the impression as I don't pay tax on the dividend in the UK ( because the threshold is 2,000 gbp) then I cannot claim for it -and I will have to pay the US tax on it even though i live in UK. Am I wrong?

Last edited by brokenhearted.; Jul 21st 2019 at 7:43 pm.
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Old Jul 22nd 2019, 2:36 am
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Default Re: form 1116

Originally Posted by brokenhearted. View Post
Examining the tax preparer's tax return they have completed for me ( US person here - so need to file both uk and usa) ......a bit puzzled by the appearance of a form 1116 claim for shares dividends I received {around 100 gbp} I was under the impression as I don't pay tax on the dividend in the UK ( because the threshold is 2,000 gbp) then I cannot claim for it -and I will have to pay the US tax on it even though i live in UK. Am I wrong?
Presumably the line with those dividends notes zero foreign tax paid. As your total foreign source income is needed to calculate your maximum foreign tax credit, that UK dividend income needs to appear on the form:

Calculating the Foreign Tax Credit In Three Easy Steps - Deblis Law
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Old Jul 22nd 2019, 7:25 am
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Default Re: form 1116

Doubtless they are calculating foreign source income in case there is a carryback from the 2019 return. More importantly have they correctly treated it as qualified?
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Old Jul 22nd 2019, 2:56 pm
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Default Re: form 1116

Many thanks for your replies.....the box at the bottom of the 1116 has been ticked as paid rather than accrued so I that was the bit that bothered me .....but they have put them as qualified.

I am beginning to think I should surrender to their better judgement and let the part of me that I recognise as control freak go - however I did have to point out the land sale that took place ths April really shouldn't be used this year and that my deceased husband was born before 1954 - which they admitted would increase the allowance for joint filing by $1300. So as much as I want just to let them get on with it but I am torn with the notion given some errors that seem very silly to miss
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Old Jul 22nd 2019, 4:00 pm
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Default Re: form 1116

I agree. It seems shocking they failed to enter your late husband's date of birth in their software. Paid is correct for the 1116 unless you (irrevocably) elected in a previous year for the accrued method.
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Old Jul 28th 2019, 10:03 pm
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Default Re: form 1116

Thank you - this is my first year of filing both uk & us taxes - decided it was beyond me at this time but i might feel different once everything settles down. A lot of dribs and drabs as I closed and drew down things ( a small TD Ameritrade stock account), one off payment for unused holiday & sick leave, TSP, along with small amounts on interest. I have to trust the tax guy but i plan to slim down my income streams it should get less of a pain to understand. I was just puzzled as I had read you can only claim a tax credit provided you pay tax in the other country - so my UK shares dividend was below the UK threshold for tax so it feels a bit wrong that I get a tax credit when i didn't pay tax on them in UK.. I think it is a steep learning curve!
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