Q. Included with my 1099s for Interest & Dividends from my brokerage account, was Form 1116, Foreign Tax Credit. What am I supposed to do with this?
A. Quite often, foreign taxes are paid on certain investments which are also taxed by the US. The purpose of the Foreign Tax Credit is to give you the opportunity to take this non-refundable credit on page two of your Form 1040, or to take a deduction for foreign taxes paid on Schedule A. You don't have to file this form if all the following apply:
1. The foreign taxes accrued or paid during the year do not exceed $300 or $600 if filing jointly,
2. The foreign income is of a "passive" nature, i.e. interest, dividends, annuities, rents & royalties,
3. All foreign income is reported on Forms 1099-Int, 1099-Div, or substitute forms.
It can be a bear of a form to fill out, so hopefully you will meet the requirements above!