# UK Bank Account on US Tax Return



## AJL

I'm currently going through my us tax return using Turbo Tax and have got to the point where I need to record the interest from my UK bank accounts at Lloyds TSB.

I've looked at my UK bank statments for my 3 accounts, worked out their max values, and totalled up the Net Interest for the year. However I believe I need to enter the Gross Amount, and find out the tax paid on that (which would obvously be the difference).

Before I phone Lloyds up is there a particular form I can request from them that will save me from explaining everything, i.e. can you send me a form xyz for 2011. Something like the 1099-INT you get from US banks.

With the way rates are the tax paid is probably only about $20 worth, but seeing as I have to report my accounts on several diferent forms I want to get it right 

Thanks in advance!


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## Bevdeforges

Not really - the problem is that the UK tax year runs from April 6th, whereas the US tax year is the calendar year. 

For US taxes, you report the gross amount paid. If you actually paid any UK taxes on the interest during calendar 2011, you can include them on form 1116 as a tax credit. Remember that individuals are on a cash basis for US taxes, so have to go by the dates the taxes were actually paid. 

Sorry, but I don't know how the UK assesses tax against bank accounts. I know my UK accounts don't seem to have any tax on the interest taken out of the interest paid (at the paltry rates of interest lately, there's not much to take anyhow!). I just report the interest paid from January through December as accumulated from my bank statements and stick that on the tax return. (Easiest to report it on Schedule B, even if you don't have enough to have to file Schedule B, since the check box for reporting the foreign bank accounts and their balances is on the bottom of schedule B. Nice way to show them you're reporting everything.)
Cheers,
Bev


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## AJL

Tell me about it, why can't the tax years be the same! 

Thanks on the schedule B, I did find out about that the other day by accident but good to have it confirmed. Form 8938 too. And of course TD F 90-22.1 which isn't part of the return.

I've worked out as far as Lloyds go, is that they deduct 20% for tax at the moment (the current UK standard tax rate - which also happens to be the same for the uk 2010-11 year). So i'm thinking I can just add 20% to my net earnt and write that 20% as the tax.

So 37.30 net becomes 46.63 gross which makes 9.325 tax. Then convert to $


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## SteveOdem

AJL said:


> Tell me about it, why can't the tax years be the same!
> 
> Thanks on the schedule B, I did find out about that the other day by accident but good to have it confirmed. Form 8938 too. And of course TD F 90-22.1 which isn't part of the return.
> 
> I've worked out as far as Lloyds go, is that they deduct 20% for tax at the moment (the current UK standard tax rate - which also happens to be the same for the uk 2010-11 year). So i'm thinking I can just add 20% to my net earnt and write that 20% as the tax.
> 
> So 37.30 net becomes 46.63 gross which makes 9.325 tax. Then convert to $


Adding 20% isn't quite correct. 

Say you received $100. If you add 20% ($20) the taxable amount would seem to be $120. 

However, algebra will tell you that Interest X (1 - tax rate) = net after tax. So the true interest earnings would be $125, 20% interest with net after tax of $100.

Note that the tax paid (even though you didn't receive it) may be eligible for US Foreign Tax Credit, Form 1116.


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## thethebaxter

*Form 8938*

Not sure if this is the right thread for my post below.

I just looked through the filing instructions for form 8938 (for most of us, we would have to start filing it for tax year 2011), the instruction for valuing interests in foreign pension plans, and foreign deferred compensation read like this:

"......... the maximum value of your beneficial interest is the fair market value of your interest in the assets of the estate, pension plan or deferred compensation plan as the last day of the tax year. If you do not know or have reason (to) know based on readily accessible information the fair market value as of the last day of the tax year, the maximum value is the fair market value, determined as of the last day of the tax year, of the cash and other property distributed With during the tax year to you as a beneficiary or participant. If you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest as of the last day of the tax year, use a value of zero as the maximum value of the organized under the laws of the U.S. asset.

But then what constitutes "readily accessible information". I am thinking of estimating the present value of my expected future benefits (using one of those annuity calculators available on the internet). But then, there are so many assumptions you have to make, e.g. interest rates, mortality rate, etc.... and your calculation can be easily pick apart. OR if you have not received any cash/distributions from these plans during the year, may be you should put down zero as per the IRS' instruction above. 

Really not sure whether to use an estimate based on present value of your expected future benefits or report zero (if you received no distribution during 2011)? Any help would be much appreciated.

Thanks,


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## SteveOdem

thethebaxter said:


> Not sure if this is the right thread for my post below.
> 
> I just looked through the filing instructions for form 8938 (for most of us, we would have to start filing it for tax year 2011), the instruction for valuing interests in foreign pension plans, and foreign deferred compensation read like this:
> 
> "......... the maximum value of your beneficial interest is the fair market value of your interest in the assets of the estate, pension plan or deferred compensation plan as the last day of the tax year. If you do not know or have reason (to) know based on readily accessible information the fair market value as of the last day of the tax year, the maximum value is the fair market value, determined as of the last day of the tax year, of the cash and other property distributed With during the tax year to you as a beneficiary or participant. If you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest as of the last day of the tax year, use a value of zero as the maximum value of the organized under the laws of the U.S. asset.
> 
> But then what constitutes "readily accessible information". I am thinking of estimating the present value of my expected future benefits (using one of those annuity calculators available on the internet). But then, there are so many assumptions you have to make, e.g. interest rates, mortality rate, etc.... and your calculation can be easily pick apart. OR if you have not received any cash/distributions from these plans during the year, may be you should put down zero as per the IRS' instruction above.
> 
> Really not sure whether to use an estimate based on present value of your expected future benefits or report zero (if you received no distribution during 2011)? Any help would be much appreciated.
> 
> Thanks,


First there are several other pieces besides the 8938, and you need to be consistent. Don't play 20 questions with expected future benefits. Depending on the plan you should be able to get a present value of what you have in it without too much trouble. Use it for 8938. You also need to do 3520 and 3520-A. 

Depending on the maximum value in each of your accounts during the year - bank, investment, pension, in some cases precious metals - if the aggregate of ALL maximums is $10,000 or more, you must do FBAR, Form TD-F 90-22.1	Report of Foreign Bank and Financial Accounts.

Are we having fun yet?


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