I did not know about the lower standard deduction for dependents. As you can see, there are huge gaps in my knowledge. I'm just a guy who tries to stay informed about US tax issues, mostly ones that apply to my specific case, so please don't take anything I say as advice. I am interested in learning about other cases though. We can try to find answers in IRS publications.
One of my children is not a dependent and has the standard deduction while the two others can be claimed as dependents so only have the lower $1050 deduction (their dividends are lower than this limit, too). I did not know that Form 1116 was not required, but if we didn't file it we would not be able to have a carryover for the dividend taxes paid in Japan, correct?
The way I understand it is if your dependent children only have a few hundred in dividends from an account in Japan, they would not be taxed by the US as they have the standard deduction. Whether they pay tax to Japan would be irrelevant.
The only reason I'm filing a 1040 in their name is that having filed FBAR's and their foreign dividends need to appear on some 1040 form. I would have thought they (the IRS? the Treasury department FBAR folks?) wouldn't know we'd met the requirement without that 8938
You can report dividends on form 1040 line 3b.
... but I guess you're saying I could get by next year with just the 1040, Schedule 6 and Schedule B. Is that correct?
As long as nothing else changes, I think that is all you would need to file next year. However, now that I think about it, people don't generally recommend that US citizens get Nisa accounts. I think there are issues with owning Japan based mutual funds as they are considered PFICs (Passive Foreign Investment Companies) and can have serious tax issues. Have you found a way around this issue?