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My 1099-DIV lists an amount in box 6 for 'foreign tax paid'. These are a result of an emerging markets ETF I own. However, TaxAct is asking whether these are Foreign source ordinary dividends or Foreign source qualified dividends.

They're gathering this information for Form 1116, which I'm exempt from because all of my foreign tax is passive income reported on a 1099-DIV and not more than $300. But I'd still like to know which category these taxes fall under, if that makes any sense. I can't find this information on my 1099 consolidated or on my brokerage's website.

  • Foreign taxes aren't dividends at all. They're not even income. I don't understand why your tax software would ask this. – Nate Eldredge Feb 18 '15 at 1:36
  • I clarified the title a bit. I believe I'm paying taxes on dividend income, so they're asking if these taxes were paid on ordinary or qualified dividends, but my 1099 makes no distinction. At least, this is how I understand it. – JLewkovich Feb 18 '15 at 1:55
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This doesn't matter, since you take the foreign tax credit for the whole amount directly on your return. You don't need to fill the form 1116, so you don't need to separate the foreign source income into different buckets.

The IRS has a helpful document, called "Publication 17", which is also includes the description of qualified dividends, and which foreign dividends can be considered qualified. It is my understanding, that mutual fund foreign sourced dividends are never qualified, but I may be wrong on that. In any case - doesn't matter for you.

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    It sounds like the OP's software is requiring him to choose one or the other. Would you recommend that the OP just pick one option at random, since it should not affect the outcome? – dg99 Feb 18 '15 at 18:01
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    @dg99 there are specific criteria for when foreign dividends are considered qualified, and if he can't show that it applies to his case - then it doesn't. – littleadv Feb 19 '15 at 3:19

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