K-1 Turbotax Entry Question

[Splash232003]

I’m filling out the K-1 section inTurbotax. 

I received a Beneficiary K1 trust /beneficiary form. The form shows deductions in 11A, 11B, 11D, and 14B. No other boxes have any values in them (ie, no income, no capital gains). On my 1040, Turbotax gave me a capital gains loss for 11D and a deduction 11B, also a deduction for Foreign tax (in Sched A, line 6).

However, When I answer the Turbotax questions for Box 14. Turbotax asks me to: “Enter the foreign tax information as shown on Box 14”.  It then provides data entry fields for foreign tax items such as

"Interest Expense", "Other Deductions: Total", "Other Deductions Foreign, US Total, "Total Applicable Losses."

I don’t have values for all of these fields, and it seems to me that there’s no reason to fill them out because all that’s in Box 14 is a small amount for Foreign Tax. Do I need to enter data for any of the fields? 

Turbotax also asks me to enter: “Qualified Business suspended passive loss”. Not sure what tis means. I just left this blank. Do I need to fill out this field?

Thanks

[ThomasM125]

You don't need to enter anything unless those items have been reported to you. The qualifed business loss would only apply if you had business losses reported on your form in the current year or carried over from previous years. They would be reported on line 6 or 7, so since you don't have any entries there, you appear to not have any qualified business losses.

[Splash232003]

Thanks very much for replying.  For 14B, I received a Beneficiary Foreign Tax Credit Schedule sheet, which did include some Dividend income. However, the Itemized Deduction figure on this sheet was greater than Dividends; also Line 5 Deduction Total was higher than Dividends. So, I assume there’s no foreign taxable income to add to my 2022 taxes. If there were foreign taxable income, I assume box 14 would have been 14E. 

[DianeW777]

No.  If you have taxable foreign dividends they must be included with other taxable income.  If you have deductions then they will be used as well if you can itemize  your deductions. The dividend income from your 1041-K1 should be shown on line 2a or 2b.  Line 14 would simply be additional information about those dividends possibly.  In the instructions for the 1041-K1 there is no '14B'.

• Form 1041-K1 Instructions (see Box/Line 14)

If your additional statement shows foreign dividends and itemized deductions enter only what is on your K1 and additional statements.  Do not enter any information in fields where do not have any figures.

[Splash232003]

Thanks very much for replying. I don't have any income listed in K-1 Boxes 2A or 2B. The dividend info, deductions and foreign tax paid appear in a Beneficiary Foreign Tax Credit Sheet attached to my K-1.

The K-1 I received is for tax year beginningin 2021, and ends in 2022. The K-1 form is from 2021, and it lists 14B --for Foreign Taxes (to be entered in Schedule A, Line 6).  Looks like this was changed in the current K-1.

[DianeW777]

You will use the K1 information on the one you received from the 1041.  Because this was a fiscal year you will use the 2021 K1 that was received to enter your information.

Both 2022 and 2021 1041-K1s have the same information for the code B in Box 14.  This is the foreign tax you paid which you may be entitled to credit for on your 2022 tax return.

If you show dividends on your Beneficiary Foreign Tax Credit Sheet then you would report those as dividends on your tax return.  You can choose to use your foreign tax paid as an itemized deduction if you itemize. The following article will help you enter your foreign tax credit or deductions.

• Where do I enter foreign tax credit or deduction?

Please update here if you need additional assistance and one of our tax experts will help.

@Splash232003 

[Splash232003]

Thanks again!

[chnoiseoff]

DianeW777 (Expert)

You are right about the online IRS instructions for the K-1 not listing anything for box 14 code B but the back of my Trust Fund's Schedule K-1 does list instructions for  Box 14 Code B (foreign taxes).  Not sure why the discrepancy.

My Trust fund K-1 foreign tax is less than $300 and several other threads have accurately reported that you can skip the more complicated forms 1116 or form Schedule A Line 6 and just enter the foreign tax as a simple deduction on form Schedule 3 (form 1040) Line 1 if your foreign taxes are less than $300 (filing single) or $600 (married filing jointly).  Unfortunately, I have yet to figure out how to get TurboTax to do that.  It wants to push the whole journey of form 1116 or Schedule A even for filers below the 300/600 threshold.  It would be nice if TurboTax software would simply bypass the very complex path for form 1116 or Schedule A if the filer enters foreign tax below the $300/600 thresholds.  Other filers have posted how complex the K-1 entry  can get.  Anything TurboTax could do to help simplify this would be great.  I have read so many frustrating posts on the Foreign Tax Deduction or Credit.  It  has to be one of the most complicated things for us non-pro types to deal with.

TurboTax help states that you don't have to fill out form 1116 to take the foreign tax deduction if I am below the $300 (single) foreign tax paid threshold, but it doesn't tell me how to skip the form 1116.  I have tried to step through and enter my $2 foreign tax but TT does not generate a Schedule 3 with my $2 entry.  Need someone to explain what I might be missing here.

In some years, my foreign tax reported on the K-1 was as low as $2 and the trouble to enter it was so hard for me that I just didn't report it on TurboTax.  I never got a complaint for the IRS most likely because the error is against me (I don't get a deduction or credit) but I am willing to lose a few dollars credit or deduction rather than struggle through the complex step-by-step questions in TurboTax.  If it was a situation where the foreign tax meant I owed more money to the IRS, I would have to fill it out, but it is my loss, the IRS gain, so I am inclined to skip it unless TurboTax could help simplify the process.

I am wondering if I could enter the $2 of foreign tax manually in the Schedule 3 1040 Line 1 foreign tax deduction or would it throw an error?  I use desktop TurboTax.

[AmyC]

Yes you can. Since you are using the desktop version, you can enter it manually and it will not cause a program error. However, it will void the accuracy guarantee.

The IRS will not care if you don't claim the credit. 

@chnoiseoff 

[alexandrafrench]

I have a K-1 for an estate with information for Box 14(B). There are no amounts in Boxes 1, 2a, or b; just in Box 11 and Box 14. For 14(b), I assume the Other Foreign Source Gross Income amount maps to TT "Gross Income Sourced at Beneficiary Level: Foreign Source Income"; Applicable Deductions & Losses maps to TT "Other Deductions: Foreign Source"; and Total Foreign Taxes maps to TT " Foreign Taxes Accrued". Where to I enter the amount for Foreign Source Qualified Dividends in TT? Also the K-1 has no information on gross income and other deductions Total or US Source.

[DaveF1006]

It depends. If the only income source is foreign sourced dividends, you would enter this amount under the heading of Gross income Sourced at the Beneficiary level, Foreign Sourced Income.  The information entered here will allow you to receive a foreign tax credit.

1. After entering this information, press continue
2. In the next screen, indicate this is passive income.
3. In the next screen, if you have no expense or deductions to report, just continue to the next screen. You are no obligated to report anything here if you have nothing to report
4. Same for the net screen if you have nothing to report.
5. Continue through the interview until you are done with this section. 

Now you need to claim the foreign tax credit.  Most of the information you entered here will be mapped to that section. Here is your next step.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5.  The first will screen inform you you already reported your information so you are off to a good start.
6. Continue until you reach a screen asking if you wish to take a deduction or a credit. You can take either depending on if you itemize your deductions. if you don't itemize, choose to take the credit.
7. Continue until you reach a screen that says income from foreign countries. Your country should be listed there since you reported it when you reported your K-1 information after entering the income from the foreign dividend.
8. Next screen has the heading Report Foreign Tax paid to XXX. Put a check in the checkbox, press continue.
9. Then there will be a screen telling you you have completed your reporting.
10. Press done in the next screen

@alexandrafrench 

[robynjonh]

I am following this thread as I have had a similar issue come up. 

I have been receiving a Schedule-K for over 20 years, and I have been doing my own taxes with desktop TT for about 10 of those, I think. This was the first year where my Schedule-K (sent to me by the Trust officers who have tax preparers prepare it for me) reported a foreign dividend income of $206 and apparently foreign tax of $14 (shown on line b of box 14).  

Because of this, several other pages have opened up that I have never seen before. After a lot of back and forth with the Trust Officers, who asked their tax preparers, who don't seem to know the right terminology even (they suggested selecting "other country" on a drop-down, and that is not even an option), the main trust officer spoke to a CPA friend of his who gave me these directions: 

"1. Various is the right choice for the country
2. She should put the $206 in the "Gross Income Sourced at Beneficiary Level: Foreign Source Income" box
3. Select "passive category" in the next box.
4. Then on the next page or 2 it will ask for the amount of foreign taxes paid and that is where the $14 goes."

So, I followed these directions, but I didn't have a "foreign taxes paid" option, only a "foreign taxes accrued",  I put the $14 there. 

In the end, it keeps throwing an error message.  One of the things it has said has been something about not having more income from foreign than U.S.  

But anyway, based on this thread, I am wondering if the $14 would actually be a credit for me that I am willing to forfeit, as it keeps throwing an error?  Because no one seems to know what to do with this information, and they are all just shrugging their shoulders and saying "talk to Turbotax".  Well, that is easier said than done. 

Ps--luckily the account for which this schedule-k comes is nearing its end, and I may not need to deal with these folks anymore.  Drives me batty when professionals pass the buck. 

please, please help!  I am a full-time, non-traditional university student who also works, and I allotted time for this during Spring Break, but here I am still dealing with this a few weeks later when I need to be doing homework--all because of this one issue. 

thanks in advance!

[robynjonh]

Adding to my own reply--

I did what was listed here, in that I added the income numbers from lines 1 and 2a to get my total income.  Then subtracted the foreign income number I had been given in order to get my US income amount.  Added the Total Income and US income numbers in box 14 where applicable, et voilà(!) no more errors.  

Does not incite a lot of confidence in the tax preparers that my Trust account officers used, but at least it seems to be good now.