# Help! 1040 Schedule B Question



## Fjordlover

Hi

I'm new to these forums, and I have to say, you guys have helped me a lot with my US taxes.

I have a question that I really could use some advice on, since I cannot find an answer for it anywhere!

I make well under the 97,000,- amount for foreign exclusion, so I've filled out 2555z, but.... I have made around 1,400 dollars in interest on my saving here.

I am a bit confused about schedule B-it says (as I understand, but I am a bit dumb in these Things) that under 1500 dollars, you don't need to fill it out/not taxable, but you need to fill it out if you have a foreign bank account. Which is sort of contradictory, imo. What do I do?

Please phrase anwers in a "taxes for dummies" jargon.

Thanks in advance!


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## BBCWatcher

No, not contradictory. Right on Schedule B, Part I, it says "Note. If line 4 is over $1,500, you must complete Part III." True. It does not say that if line 4 is $1,500 or less you must not complete Part III.

Keep reading down to Part III: "You must complete this part if...." Do any of those conditions listed apply? If yes, then you must complete Part III.

When reading instructions treat every word as having at least some meaning and significance. But don't jump to logical fallacies. "If A is true then B is true" does not mean that "if A is not true then B is not true." For example, I could say that if you like beer then you should visit Belgium, but unless I actually say that if you don't like beer you should not visit Belgium, you must not assume it. As it happens, if you like chocolate you should visit Belgium. There's more than one reason to visit Belgium, just as there's more than one reason to fill out Part III on Schedule B.

By the way, if you paid foreign income tax on that interest, have a look at the Foreign Tax Credit.


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## Bevdeforges

The short answer is, yes, you have to fill out Schedule B if you have an overseas (i.e. non-US) bank account or bank accounts with a total balance of $10,000 or more. What they're after is an indication that you should be filling out a FBAR report. This is the form you must file online (no paper accepted) in order to list your foreign bank accounts, along with the high balance.

Whether you fill out Part I of the Schedule B is up to you. It's not obligatory if your interest to report is under the threshold mentioned on the form - but as long as you have to fill out Part III anyhow, it's a handy way to "explain" whatever balance you put on your 1040 line 8. (See, I'm not always "un-cooperative" when filling out my tax forms.)
Cheers,
Bev


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## Fjordlover

Ok, so basically since I have around 1,400 dollars in interest, it is not obligatory for me to fill out Part I since I am under the threshold amount, but since I have a bank account(s) in a foreign country, I must fill out part III. 

Since it is under the threshold amount, should I put it in line 8b if I wish to include it on Part I of Schedule B? I know it is a stupid question, but tax lingo makes my head spin!

Will be filling out the dreaded fbar this weekend.

Thanks again for the help, guys!


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## Bevdeforges

The interest income goes on line 8a (i.e. taxable interest income) or line 8b (tax-exempt interest income). Tax-exempt interest is stuff like interest paid on municipal bonds (only those issued in the US). 

Not sure which "threshold" you're referring to - but interest income is considered "passive" income and is not subject to the FEIE, which is an "exclusion" not an "exemption." (I know what you mean about the terminology driving you nuts.)

Normally, the personal exemption and the standard deduction should wipe out the $1400 in interest, resulting in no taxes due. But you have to follow the forms through to make sure it turns out that way. If it doesn't, you then wind up going the Foreign Tax Credit route - to take a tax credit against any US tax liability for income taxes you have already paid on the interest income to Norway. 
Cheers,
Bev


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## Fjordlover

Thanks Bev! You have been a huge help. If I ever get the chance, I'll send you a nice bottle of akavit for all of your help!

I must have had a brain freeze! I guess that what happens when you try to do taxes for 2 countries in 2 languages at the same time! For some reason I thought interest under 1500 dollars wasn't taxed...duh! (head slap) 

I did the math and it looks like the standard deduction and exemption cancelled out the tax on the interest nicely! I'll double check the math this weekend, but it looks ok so far. I hope I haven't forgotten anything. Ironically, I've never been so happy to earn so little in my life! Silver lining

I'll probably come back and start a thread when I start the fbar. So far it seems pretty straight forward, so fingers crossed!

Again, thanks Bev and BBC Watcher for your help! Keep helping us poor double taxed Americans out!


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## BBCWatcher

Norway is a comparatively high tax jurisdiction, so I would consider not using the FEIE and just using the Foreign Tax Credit. That could generate excess Foreign Tax Credits that could then be used to offset any future U.S. taxes (up to 10 tax years in the future). If that's what the calculation shows, fantastic, I'd do it.


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## Fjordlover

That's good advice, BBC Watcher! I never thought of that. Finally, high Norwegian taxes can be used to my advantage!

I think I'll stick to the FEIE this year, just because it is easier, but I will definitely look into the Foreign Tax Credit for next year when I plan to have a computer tax program, like Turbotax, to help me out.


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## Bevdeforges

The US based filing programs aren't normally terribly helpful/useful when you're trying to take the FTC. You have to know pretty much what you can and can't take - basically you can take the FTC only for income tax. (Some "high tax jurisdictions" have admittedly high taxes and high tax rates - but if it isn't income tax as defined by the IRS, it doesn't count for FTC purposes.)

Be sure to check the website for the Paris office of the IRS. They tend to focus their information and links on those genuinely useful for overseas taxpayers.
Cheers,
Bev


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