amend previous year's tax by adding foreign financial income

Your interest income would be added to the AGI on Line 1.

You do not make entries on any lines that are not changed. (You most likely will only use 1-3-5-6-11-20).

You do not want to do any attachments, but provide an explanation- the name of the bank and amount.

Thanks for the reply. I'm California resident so I guess I'll also file amend to CA. 

Should I only file form 540-x? If so, there are sections for penalty and interest, how should I calculate that?

Thanks!

And additional question, given there is no 1099-INT issued by foreign bank account, should I just file 1040x in this case?

For the California amendment, just the 540X will suffice (with an explanation in part II). For the penalties and interest, you could leave those blank and let the state bill you (checking that their amounts look reasonable before paying, of course). Otherwise, here’s their penalty info (yours will be the one for paying late, but not filing late), and interest guidelines.

Regarding your last question, you should provide a statement in addition to the 1040X itself, as Mary said. (I would actually print out an official Schedule B and fill it out with the foreign payer’s info, but since you’re adding a little income they otherwise wouldn’t even know about, the government probably won’t be too picky about your reporting!) Thanks @cathiexu!

Hi @RalphH1, thanks for your reply!

As to California state amend, I searched they also need an amended 540, does that mean, I need file 540 again with corrected gross income?

Thanks! 

Cathiexu, thank you for correcting me—the 540X is no longer used, replaced by the combination of Schedule X and a revised 540 (would you like a job in taxes?). The Schedule X will show the amendment circumstances and the 540 will have the new numbers, starting with your slightly-increased federal AGI on line 13, and then subsequent adjustments where appropriate. (By the way, you’re so on top of all of this that I’m predicting you’ll have zero tax problems your entire life!)

Hi @RalphH1 , as to schedule B:

1. As I'm filing amend to include foreign interest/dividend, for PART 1, should I also list the interest received from U.S. sources(which I have reported last year),  or, only the foreign bank is needed?

2. for PART 2: same question as above. 

Thanks! 

If you already had a Schedule B on the original return, you’ll want to include everything that was on it, plus the new income. (In other words, submit a complete, updated Schedule B.)

Also, if the Schedule ends up so crowded that your info about the foreign payer doesn’t fit, including the additional statement would be great. I’m guessing that’s why Mary (above) recommended the statement and not the Schedule B, anyway. (Foreign circumstances don’t always fit neatly into the usual tax reporting requirements, so a little flexibility is required. And again, the IRS isn't likely to be concerned as long as things are clear and you’re obviously making a good-faith effort to comply with the tax rules…)

You're welcome, @cathiexu!

Hi @RalphH1 , thanks for additional info for schedule B.

Now I have some questions about California tax amend.

as we mentioned, we need now send corrected 540 and schedule X, not 540x anymore.

I already received refund from California for tax year 2021. For corrected 540, should it only consider this additional income, or should it be AS IF I had added extra income last year, eg.  Assume my aggregated income in old 540 was 10k, then should corrected 540 now be 10k+ foreign income?

if it’s the latter, last year I was supposed to received refund and I did, then for corrected 540, should I still enter refund (of course a slightly lower number considering increasing taxable income) , or I should enter amount I owe because this foreign income? 

I posted the above questions in another thread for Califorlia state tax only , could you please check out and leave your comment there. Thanks! 

https://ttlc.intuit.com/community/after-you-file/discussion/desperately-need-help-to-file-ca-state-amend/00/2870893

Thanks!

Sorry—it looks like another agent is working on the question you posted in the California state thread, so I have to continue in this thread…

According to the amendment instructions (here), and those for Schedule X (here), you should do your new Form 540 with all your income and deductions (so that it’s a complete and updated version, showing a smaller refund because of the new interest added to everything that was on that form the first time around). Then your Schedule X (here) reconciles the smaller refund (on line 4) with the one you already received (line 2), and the difference will be your new tax due on line 7 of the schedule. So you’re basically fixing the 540, and the only reference to there being an earlier version (except for the “Amended Return” box being checked on the 540) is on Schedule X.

Thanks @RalphH1 , that is really helpful! By checking my old CA tax return for 2021, I found this schedule (California Adjustments - residents) was also attached.  For amend purpose, should I also amend this schedule and mail to CA state? Thanks!

Their amendment instructions (here) say to send the 540 and Schedule X “along with all required schedules and supporting forms,” and this isn’t completely clear to me. But since they’re not specifying that they only want the forms which support the changes, I would send the Schedule CA, with the updated column A interest amount on it. (But according to that schedule’s instructions, foreign interest would not be an adjustment in columns B or C.)

Thanks @RalphH1 , you are the best!

@RalphH1 , I have a follow up question - if some of the foreign income are dividends from mutual funds (no sell, just dividend income), when we file amend, should we also add form 8621? the total dividend amount is less than $100. Thanks

It depends.  A 8621 is filed if you are a shareholder of a Passive Foreign investment Company (PFIC): This would be filed if you:

1. Receives certain direct or indirect distributions from a PFIC.  This include distribution of dividends.
2. Recognizes gain on a direct or indirect disposition of PFIC stock,
3. Is reporting information with respect to a Qualified Electing Fund (QEF) or section 1296 mark-to-market election,
4. Is making an election reportable in Part II of the form, or
5. Is required to file an annual report pursuant to section 1298(f). See the Part I instructions, later, for more information regarding the person that must file pursuant to section 1298(f).
6. There is no threshold regarding the $ amount of distributions thus any amount paid should be reported on a 8621.

Please, read this IRS article for further assistance.  

Hi @RalphH1 , one follow up question regarding 1040X.

In my original return, I didn’t attach schedule B as it doesn’t exceed threshold . By adding  this additional foreign interest, the total interest income still doesn’t exceed $1500. 

you mentioned to add “statement” instead of schedule B.  What do you mean by statement? I thought there is a section on 1040x to explain what was amended. Other than that, did you mean to put 

 extra normal A4 paper where I type something to explain what this interest income is ?

thanks!

There is the $1,500 threshold, but also the “interest in, or signature authority over, a financial account in a foreign country…” official filing requirement for Schedule B (here). My thinking was that this applied to your situation, so Schedule B was officially called for (with a statement added if more space was necessary, but not for redundant info that already fits on Schedule B and the 1040X). The other agent (Mary) recommended a statement, and that would work fine too, as long as you give the IRS the info (and the tax due, of course!).

@cathiexu, I admire your attention to detail, but I hope you’re not stressing-out about all of this. You’re obviously going to great lengths to fulfill your tax obligations, so I’m thinking the IRS likes you too!

Thanks @RalphH1 , I appreciate your patience answering my questions. It is been a stressed out week to understand and file amend for the first time as work visa holder in the U.S., I appreciate all your valuable input here and thanks for your understanding!

You're very welcome, @cathiexu! I've really enjoyed this project here. And I hope your stay in the U.S. (except for the many hours of tax preparation...) has gone well so far!

Feb 17, 2023 at 9:33 AM