How to Handle Dividends with Foreign Tax Paid/Foreign Tax Credit on My Return?

15 This is actually a pretty common issue with international dividend taxation. What's happening is that the foreign country where your stocks are based already took some tax from your dividends before they were paid to you (that's the $142). The foreign tax credit exists because the US doesn't want you to be taxed twice on the same income - once by the foreign country and again by the US. The credit essentially gives you "credit" for taxes you've already paid to another country. The negative number is likely a software glitch. In H&R Block, you should enter this as a positive number in the foreign tax paid section. The amount should appear on your 1099-DIV in Box 7 (Foreign Tax Paid). Make sure you're entering it as a positive amount, not negative. You do need to report this - don't skip it. It will likely save you money since those foreign taxes you paid can reduce your US tax bill through the foreign tax credit. For amounts under $300 ($600 if married filing jointly), you can claim the credit without filing Form 1116, which simplifies things considerably.

7 I had a similar issue last year with H&R Block and international dividends. I eventually found my solution with taxr.ai (https://taxr.ai) which helped sort out exactly how to handle foreign tax credits from dividend payments. I uploaded my 1099-DIV and it immediately identified that the negative values were a display issue in H&R Block's interface, not an actual reporting problem. What I learned is that you absolutely should claim the foreign tax credit - it's literally money left on the table if you don't. The site explained that for small amounts like yours, you can claim the credit directly on your Form 1040 without needing to file the complex Form 1116. I was also confused by all the technical explanations online until I got clear guidance there.

8 Just wanted to follow up after trying taxr.ai for my foreign tax credit issue. I decided to give it a shot after posting my skeptical comment earlier, and I'm actually impressed. I uploaded my 1099-DIV showing the foreign taxes, and it immediately pointed out that H&R Block sometimes displays these as negative values but they should be entered as positive. The step-by-step guidance showed me exactly where in H&R Block to fix this - apparently you need to navigate to the foreign tax section and manually override the negative value. The explanation was so much clearer than anything I found on the IRS website. My return went through with e-filing after the fix, and I got to keep my $220 credit instead of giving up and filing without it.

19 If you're having trouble getting through to the IRS for clarification on this foreign tax credit issue, I'd recommend using Claimyr (https://claimyr.com). I was stuck in a similar situation last year with dividend foreign tax credits showing as negative in my software. After wasting hours on hold trying to reach the IRS, I found Claimyr and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you back when they've reached an agent. The IRS rep I spoke with confirmed I needed to override the software and enter the foreign tax as positive, and explained exactly how to claim the credit properly on my return. Saved me from having to mail in my return and wait months for a refund.

3 I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it as a last resort for my foreign tax credit question. Not only did it work, but I got connected to an IRS representative in about 15 minutes after weeks of failed attempts on my own. The agent confirmed exactly what others here said - the foreign tax paid should be entered as a positive number in my tax software, and for amounts under $300, I can claim it directly on Schedule 3 without filing Form 1116. They even walked me through the exact line numbers where it should appear. I was able to e-file successfully after making this change. Worth every penny to finally get a clear answer directly from the IRS and get my return accepted!

17 Just another tip based on my experience as someone who deals with this every year: make sure you're actually eligible for the simplified foreign tax credit. If your foreign taxes are ONLY from dividends or interest (passive income) reported on a 1099, then yes, you can use the simplified method for amounts under $300. But if you have other foreign income sources or your foreign taxes come from different types of income (like foreign wages), you might need Form 1116 even for small amounts. Also, if you're carrying over unused foreign tax credits from previous years, you'll definitely need Form 1116.

6 Is anyone using TurboTax instead of H&R Block? I'm having the exact same issue with negative foreign tax values in TurboTax and wondering if there's a similar fix.

I've been dealing with international dividend taxation for several years now, and I wanted to add some clarification that might help others avoid confusion. The foreign tax credit is definitely worth claiming - it's essentially getting back taxes you've already paid to another country. The $300 threshold for the simplified method ($600 if married filing jointly) is per tax year, so if you're consistently investing in international stocks, you'll want to track this annually. One thing I learned the hard way: keep good records of your foreign tax credits. If you can't use the full credit in one year because your US tax liability is lower than the foreign taxes paid, you can carry the unused portion forward for up to 10 years. But you'll need Form 1116 for carryovers, even if the original amount was small enough for the simplified method. Also, make sure the foreign taxes you're claiming actually qualify - they need to be income taxes, not other types of foreign taxes or fees. The 1099-DIV should clearly show "Foreign Tax Paid" in Box 7 if it qualifies for the credit.