Do I Have to Report Interest from Foreign Bank Accounts?

by Jerry Moret  

I have accounts in a foreign bank. Do I have to report interest on those accounts? If so, how? I've heard there is a TDF Form.

Yes, you have to report the interest. United States citizens and foreign residents in the United States must report all income, including interest on bank accounts, regardless of where the income came from. To report interest on a foreign bank account, convert the interest into U.S. dollars and write in that amount on Schedule B of Form 1040 of your federal income tax. Similarly, you will need to report the same amount on your California income tax if you must file California taxes.

If your bank did not provide a conversion of the amount at the time they provided you with a statement, you will need to do the conversion yourself or have a qualified tax preparer, like a CPA, do it for you. There are a number of currency converters available for free over the Internet. One is at www.xe.com/ucc/. You can either use the conversion rate as of Dec. 31 of the year for which you are filing taxes or an average conversion rate for the entire tax year. If another country taxed you on the interest earned from the foreign bank, you may claim a foreign tax credit.

The form you refer to in your question is Form TD F 90-22.1. It's an information form the U.S. government requires from any U.S. citizen who has a financial interest exceeding $10,000 in a bank, securities, or other financial account in a foreign country anytime during the previous tax year. That form is due on June 30. You can obtain a copy of the form at www.irs.gov. Enter the form number in the publication search window.

Jerry Moret is principal of Gerarde Moret, CPA. He can be reached at (707) 569-0464.

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