I have a Scottrade account and own several foreign stocks.
I received dividends from these stocks, Scottrade automatically deducts a foreign tax on the dividend.
My question is, come tax time, do i need to put these earning in something special? Will i be getting taxed by the US also on these earnings?
Do i need to file anything with the foreign country?
Assuming you’re in the US, form 1099Div contains a box for “Foreign Tax Paid”, which is credited against your tax. I forget the specific mechanics on the 1040 for entering this, but recall that it was fairly simple.
I’ve never had to file anything with the foreign country, although my tax liability in any one was never all that big.
You’ll get a 1099-DIV from Scottrade which lists the amount of foreign tax paid. (Mine came to $4.96 this year. w00t.)
I don’t remember the rules for deducting the foreign tax on your 1040, but that’s why I have a CPA.
It shows up as “Line 47” on the 1040.
To claim a tax credit for it, you may have to fill out Form 1116. It’s possible to take the foreign tax credit without filling out the form, but there’s a list of requirements (it was entirely interest/dividend, less than $300, and some other requirements).
Otherwise, Form 1116 will give you a way of determining if you can take the credit and how much of a tax credit you can take.
There’s a place to enter that on your tax return, and you get a tax credit for it. I don’t recall what line on the 1040; TurboTax has a place for me to enter it in the questionnaire. It does reduce my US tax by (I think) the full amount.