# Reporting Foreign Interest Income



## horseshoe846 (Feb 8, 2017)

I about to brighten all of your afternoons... (hopefully bringing a smile)

I wasn't sure how to get the interest for each of our foreign accounts on my 1040 in a manner that someone else (let alone I) could understand- So last year I fabricated 1099-INT for each - with the dollar amount reported fixed for the exchange rate.

I even link in the 1116 form directly on the 1099-INT.

Thoughts appreciated.


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## Moulard (Feb 3, 2017)

I have just started playing with the downloadable versions of one of the free-file providers.

I have to admit that I did something similar to get the information into the forms in a manner less prone to human error. Or at least less prone to my human error.

Makes splitting tax credits across multiple 1116 a breeze.

However I suspect that I will print it all out as a PDF, delete the mocked up 1099-INT and file the old fashioned way.


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## Bevdeforges (Nov 16, 2007)

I take it that you're using a tax preparation software. In that case, faking the 1099s may be the only way to get all the data entered. (Which is no big deal, given that you don't normally submit the 1099s with your return.) 
Cheers,
Bev


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## horseshoe846 (Feb 8, 2017)

Moulard said:


> I have just started playing with the downloadable versions of one of the free-file providers.
> 
> I have to admit that I did something similar to get the information into the forms in a manner less prone to human error. Or at least less prone to my human error.
> 
> ...


(And here I expected either laughter or ridicule)

But what is the old fashioned way ?

I receive no 1099-INTs from our foreign banks - and the IRS wouldn't have a clue what to do with what I do receive.

If it wouldn't cost me $800 USD - I'd almost use a tax preparer one year just to see how they handle it...


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## Moulard (Feb 3, 2017)

Old fashioned as in print it out and post it to Austin. (minus the 1040-INT)


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## horseshoe846 (Feb 8, 2017)

Moulard said:


> Old fashioned as in print it out and post it to Austin. (minus the 1040-INT)


We have mailed EVERY return over the years.


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## Moulard (Feb 3, 2017)

According to a 2010 Treasury report 73% of returns that included a From 2555 between 2007 and 2009 were filed on paper.


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## Bevdeforges (Nov 16, 2007)

Moulard said:


> According to a 2010 Treasury report 73% of returns that included a From 2555 between 2007 and 2009 were filed on paper.


Of necessity, because up until a couple of years ago, the IRS e-filing system had problems with foreign addresses (and still has problems with returns of those of us with NRAs without ITINs).

Paid preparers are required to file electronically. What this tells me is that most overseas filers do their own returns.
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Bevdeforges said:


> Paid preparers are required to file electronically. What this tells me is that most overseas filers do their own returns.


Interesting. I wonders what the security's like. Do they use a common IRS system, or do they make their own arrangements?


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## Bevdeforges (Nov 16, 2007)

iota2014 said:


> Interesting. I wonders what the security's like. Do they use a common IRS system, or do they make their own arrangements?


Ultimately, all e-filed forms go through the IRS e-filing system. The paid preparers use a variety of software programs to generate the e-filings, but they conform to a given standard. (Sort of how the various individual software programs like TurboTax and TaxAct each work a bit differently, but when you're done, you submit a standardized electronic document if you are e-filing.)

https://www.irs.gov/tax-professiona...most-tax-return-preparers-must-use-irs-e-file

Cheers,
Bev


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## celticweb (Mar 26, 2016)

Bevdeforges said:


> What this tells me is that most overseas filers do their own returns.
> Cheers,
> Bev


Actually not necessarily, my UK based British accountant filed Form 8948 with my paper return, basically "Preparer Explanation for not Filling Electronically" and I would imagine many accountants overseas are filing this form for clients with their paper returns. so the fact there are so many on paper don't really tell us how many are self fliers. His reason on the form was "The preparer is ineligible to file electronically because IRS e-file does not accept foreign preparers without social security numbers who live and work abroad"

I used him for the streamlined, but did the last one 2015 myself using his returns as a model. I found it very easy. of course i won't need to file at all now that I renounced (speaking of which my CLN arrived this week on Monday so it was super quick, just over a month)


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## celticweb (Mar 26, 2016)

Also my method of self filing was download the PDF, fill and add everything manually. then i ran the numbers through turbo tax and previewed my form 1040 and it all matched up to my figures, taxable income, tax, foreign tax credits so i knew i did it right. doing the same this year which is my last full filing year
But for sure a method for working out the foreign interest in an easy manner would be great. went i say i thought it was easy, i meant easy for me to work out what to do, not that it wasn't time consuming.


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## Sendrigo (Feb 15, 2017)

Bevdeforges said:


> Of necessity, because up until a couple of years ago, the IRS e-filing system had problems with foreign addresses (and still has problems with returns of those of us with NRAs without ITINs).
> 
> Paid preparers are required to file electronically. What this tells me is that most overseas filers do their own returns.
> Cheers,
> Bev


Actually, although paid preparers are required to e-file if they expect to be preparing 11 or more returns, there are certain scenarios in which that requirement can be waived:

1. The client chooses to file on paper
2. The preparer may request a hardship waiver by filing Form 8944.
3. Some returns are impossible to e-file. A specific example would be a client who has a capital gains statement from Schwab in which there are various investments and thus it is cumbersome to enter each one as a separate line item. In such cases, you will not be able to e-file the return and must mail it in. This has happened to me on many occasions.


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## Sendrigo (Feb 15, 2017)

horseshoe846 said:


> (And here I expected either laughter or ridicule)
> 
> But what is the old fashioned way ?
> 
> ...


Yes, you won't be receiving a 1099-INT from your foreign bank unless it is the foreign branch of an American bank, such as Citi. 

In this scenario, however, you will still report the interest income on Schedule B of your Form 1040 or Form 1040A. 

By the way - a simple return should not cost US$800. <snip>


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## horseshoe846 (Feb 8, 2017)

quantage said:


> Yes, you won't be receiving a 1099-INT from your foreign bank unless it is the foreign branch of an American bank, such as Citi.
> 
> In this scenario, however, you will still report the interest income on Schedule B of your Form 1040 or Form 1040A.
> 
> By the way - a simple return should not cost US$800. <snip>


I'd have to double check but I don't believe we received a 1099-INT from Citi for our Banamex account last year. We DO receive statements from Banamex on our retained taxes.

$800 USD was the lesser of the two quotes we received. Since - I'm done with the FBARs (perhaps 2-3 hours) and I'm about 60% done with the 1040 etc. (perhaps another 3-4 hours). 

I really don't want to be audited - stress is harder to deal with as you age - but if an audit would tell us that we were doing it 'right' I'd almost welcome it.

Years ago we had a situation where I was working as a sub-contractor for a company which offered a new 401K plan. I promptly maxed out my contributions and later that year I left to take a new position. At that time I rolled that new 401K into my existing IRA. About a month later we received a letter that the 401K plan failed participation requirements. I had to take an early distribution from my IRA. THEN the IRS came back and said that we had not made proper quarterly pre-payments based on the failed 401K plan. I am college educated but I could not understand how to complete the form they wanted. I set up an appointment at the nearest IRS office. We sat with the employee for a good while, he called in a co-worker, and finally he said - tell you what - send us a check for $100 USD and I will put a note in your file that you are good people...


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## Bevdeforges (Nov 16, 2007)

People tend to have this irrational fear of being audited. For someone with huge and complicated investment, some of which are designed to evade taxation, this is probably a rational fear. But for the ordinary person, the chances of being audited are pretty slight, and even less for those of us living outside the US. 

Your experience, however, does not sound entirely on the up and up. >>send us a check for $100 USD and I will put a note in your file that you are good people...<< is definitely NOT according to IRS policy. But that's all water under the bridge at this point.

Your best option could be to use one of the commercially available tax preparation programs and simply invest the time in the first year to learn how it works for your particular situation. The following years will be much easier as you'll be used to how it all works. A good faith effort on your part is the key thing. And if you should get audited (a really big IF) it's as you say, a way of finding out whether you did it all "correctly." (Though just for the record, there is not a single "correct" way to do anyone's taxes these days, what with all the various options that are available.) And there is always the Taxpayer Advocate if you don't agree with what the audit finds. 
Cheers,
Bev


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