How to report stocks owned in a foreign broker in your tax return?

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international001
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How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Mon Jun 29, 2020 7:31 am

Turbo Tax asks me if I have an account in a foreign bank, but doesn't asks me for any income of dividends?

My guess was that you report the dividends, you report it in schedule B, you pay at your marginal tax bracket. Then you can claim a credit for the withholding portion in that country.

Am I right? Is Turbo Tax able to handle that?

fabdog
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by fabdog » Mon Jun 29, 2020 8:19 am

The question on foreign bank account is to determine if you have a filing requirement specific to that... if you have a foreign bank account(s) that had more than $10K equivalent at any time during the year you have to file an FBAR, irregardless of dividends.

That's what Turbotax is asking about, to determine if you need to file an FBAR. You can learn more here. Not sure why they list it under self employment, applies to everyone

https://www.irs.gov/businesses/small-bu ... ounts-fbar

Dividend reporting, as long as you have the form reporting from the foreign entity, TT can handle that

Mike

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international001
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Mon Jun 29, 2020 5:58 pm

Thanks, that's what I thought, the questions where just for FBAR purposes.
Funny thing is that I got some dividends on 2019, but I didn't own any stocks yet. It was an inheritance that I didn't own till 2020 (while doing the legal stuff), but once I owned it, I retroactively own the dividends it generated on 2019. So I guess I'm excluded from FBAR till next year.

But my question still holds. How do you report those foreign dividends on Turbotax?

fabdog
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by fabdog » Mon Jun 29, 2020 7:39 pm

you should get a reporting statement from whoever paid (the estate, brokerage, etc) and enter that as you would a 1099 from a US brokerage. If in a foreign currency, the IRS has currency conversion tables to use (you can just use the yearly average) and report that, plus any foreign tax paid/withheld

Mike

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international001
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Tue Jun 30, 2020 9:15 am

I do:

- Dividends on 1099-DIV->Update
- Add Another Broker or Payer
- I'll type it myself
- Received from : Foreign Broker, 1a.Ordinary dividends: all the dividends I have, 1b.Qualified dividends:0, 2a.Total capital gain distr:0
- None of this situations apply to me: a) A potion of these dividends is US Government interest, b) I need to adjust these dividends, c) This is an ESOP distribution d) State income taxes were witheld on these dividends (boxes 13-15 on your 1099-DIV)

There is no place where it tells me the amount witheld (I should add consider 15% per tax treaty). Should I hack it and use option d) ?

fabdog
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by fabdog » Tue Jun 30, 2020 11:05 am

Option D is not the place to put foreign taxes... that will give you credit for tax withholding to your state taxes, and mess up your state tax return.

If the form does not show any withholding, you'll have to contact them and ask how much they withheld. If they say 15%, or give you a different number, that goes in Box 6 of the 1099 input form

Mike

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international001
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Tue Jun 30, 2020 1:21 pm

fabdog wrote:
Tue Jun 30, 2020 11:05 am
Option D is not the place to put foreign taxes... that will give you credit for tax withholding to your state taxes, and mess up your state tax return.

If the form does not show any withholding, you'll have to contact them and ask how much they withheld. If they say 15%, or give you a different number, that goes in Box 6 of the 1099 input form

Mike
I know how much they (tax agency in foreign country) witheld (or how much they are supposed to witheld according to treaty): 15%
Now, how do I manage to include this information with TurboTax?

fabdog
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by fabdog » Tue Jun 30, 2020 1:42 pm

put that number (if you are satisfied they withheld 15%) in Box 7 (foreign taxes paid) of your turbotax 1099 screen

Mike

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international001
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Tue Jun 30, 2020 6:50 pm

What do you mean my turbotax 1099 screen?

I tried to do:
- 'Foreign Tax Credit'
- I unclick 'You have no more foriegn taxes to enter other than those you already entered on a 1099-DIV, ..'
- It tells me I have to use 1116 to claim the foreign tax credit
- I choose to take the credit
- I start the section 'Reporting Foreign Taxes Paid'. It teslls me we'll begin with foreign taxes reported on 1099-DIV, ...
- I select 'Various' for countries to which you paid foreign tax on dividends reported on 1099-DIV
- Then I go to a section to complete form 1116
- I select 'Passive Income' and the country
- I list the foreign broker and the amount that corresponds to the 95%
- I don't select any Deduction
- I select $0 as forign qualified dividends
- I select taxes were paid (not accrued)
- I add nothing for the following: any other deduction for passive income, Investment Interest, Trade or Business Interest expense, Passive Interenst expense, Reduction in Foreign Taxes, High Tax Kickout, Foreign Tax Credit Carryovers, AMT Foreign Tax Credit Carryovers, Gross Income Adjustment, adjustments to taxable income, Foreign Loss, Recharacterization of Loss,

But the foreign tax credit never changes. No form 1116 is required.
I guess I am doing something wrong. I don't see why I have to say I have to talk about foreign taxes reported on 1099-DIV.

fabdog
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by fabdog » Tue Jun 30, 2020 7:26 pm

Under "wages and Income" in TT, then there is a section for 1099-DIV. I assume this is where you entered the dividend info from the foreign holding

When I click that, I get a list of the 1099-DIV's I have entered. When I click edit next to one, it gives me an input screen that shows me all of the fields I entered from that particular 1099. Who it's from, Box 1a/1B, 2a, I can check the box saying I have more items and it shows me my foreign tax paid in box 7 (and REIT divs in box 5, but you don't need that) Box 7 in this screen is labeled Foreign tax paid.

When you are entering a new 1099, you have to check the box that says my form has more info that this.

From what you entered below, it sounds like you then went to deductions/credits, and tried to walk thru the foreign tax credit. You entered all the info, and you say foreign tax credit didn't change. So how much foreign tax credit are you getting? If single, $300 does not require 1116, it MFJ, up to $600 without 1116.

Specifically, Schedule 3, part 1, what foreign tax credit are you getting? Is it what you expect? What is the total amount of Foreign tax paid from all your accounts, not just this one? If you have too much compared to income, some might be a carryover... but the data is carried in from my 1099's to the 1116.. so you could have done everything you said and your 1116 didn't change because the data may already be there.

Part III of 1116 figures the credit.. takes your foreign taxes, shos a max credit, and should then transfer foreign tax credit to Schedule 3, Part 1, where it
then carries to non refundable credits on your 1040.

Mike

Topic Author
international001
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Wed Jul 01, 2020 12:50 pm

Ohh.. that was it.

I had to click on 1099-DIV -> I have more items -> Enter foreign tax paid. It tricked me when it said that this was uncommon.

I guess at the end it's a 'hack' because I'm pretending I had a 1099-DIV for a foreign institution. Do I need to indicate something special for the foreign broker, perhaps list it as 'MyForeignBrokerName (Country)'

I had $180 euros of tax credit before, and now I have about $95 more. So I won't hit the $300 threshold to need a 1116.
So I guess when I went to 'Foreign Tax credit' it assumed I was filling 1116. I guess I did something wrong there, because it should have given me at least a bit of extra credit. But I'll worry about this later

Would that make sense?

fabdog
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by fabdog » Wed Jul 01, 2020 1:51 pm

Makes sense. I would title your 1099
'MyForeignBrokerName (Country)
or something so that you'll remember if you have to look back in future years or use it again next year in turboTax

I think you should be set

Mike

Topic Author
international001
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Re: How to report stocks owned in a foreign broker in your tax return?

Post by international001 » Wed Jul 01, 2020 5:07 pm

Great.

A semi-related question in case you know.

Is for this company https://finance.yahoo.com/quote/TEF
I understand that since it's traded on NYSE (also in the Spanish market https://es.finance.yahoo.com/quote/TEF.MC/), then its a qualified foreign corporation and dividends are eligible to be qualified.
Am I right?

What I am not sure is how the holding period (for qualification purposes) is defined when it's an inheritance. I guess I can consider them more than 60 days, since the holding period is considered > 1 year for selling purposes, anyway: https://www.hrblock.com/tax-center/inco ... ng-period/

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