Joint foreign account with parents non US residents. should i add the interest in my tax return? I do not enjoy any income on that acc. i am joint holder for emergency.

[kan048]

I am US resident as i pass the presence substantial test and i am holder of a joint foreign account with my parents who are non US resident and do not file taxes. i do not enjoy any income on this account and i am holder of this account for emergency purpose. do i need to add the interest earned on this account on my US tax returns?

[MaryK1 · Accepted solution]

No, if you did not actually receive any of the interest income, you are not required to report it on your tax return.

[kan048]

Thank you. there is interest earned on this account but since i am secondary holder of the joint account, should i still not declare this as my income? primary holder is non US resident or citizen

[MaryK1]

No, if you did not take the income, the income does not have to be reported.  (You may still have to report the foreign account Form 8938, Statement of Specified Foreign Financial Assets- this form just reports the existence of the account.

[kan048]

Thank you. what do you mean i did not take the income? does it mean the interest remained on that foreign account and not brought into the US?

so i have another foreign account that i earned interest on and i am the primary holder but the income remained on the foreign account but was not brought into the US, should that be considered as additional income in the tax return 1099 form?

[MaryK1]

You would have to report it as income if you had the right of possession- (based on the limited facts) essentially in the first case, you did not have income because it was your parent's money.  In the second case, it would still be income even though it was left in the account overseas because you were the only account holder and you could have (even if you did not) taken the money out.  With the first account, even though you could have taken the money out (by rights as an account holder) because your parents are also able to, it is different.  Also,  for the first (shared account) if the money was originally that of your parent's (as opposed to you and they putting the money in) the interest earned resulted from their contribution.  For an account in your name only, it was your money that earned the income, so it is your income.

[kan048]

thank you so much for very valuable and clear information. very helpful

[MaryK1]

You are welcome- it can be very complicated and we are happy to help any way we can!

[omchandrasekhar]

For one of the saving account, rule says "For calculation of share of an individual in joint account, each joint holder have equal share in each joint account." I am a secondary joint holder of the account, along with my parents as the primary holder. The interest is directly deposited into parents account which I do not have access to, and also I do not take the interest or deposit/withdraw from the account. The Money was originally deposited by my parents. I have not done any transaction on the account. The account value > $10k. Should I be reporting it on FBAR, if so as a join account or signatory authority? Should I pay income tax along with my taxes in US. My parents are non US residents.

[rajeshh]

Hello, can somebody reply to the FBAR vs having to file the Form 8938 in this situation, where one is the second holder in a foreign bank account. According to this link, 

https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements

in the section titled "when do you have an interest in the account or asset", it seems FBAR is required when one has signature authority (which would be the case as the second holder in the foreign bank account) , whereas the 8938 would be required if the proceeds, income etc would have to be reported on the US tax return, which would not be the case as per the prior discussion in the thread. So the question becomes, does Form 8938 have to be filed in this case?  I am asking specifically because one of the prior replies mention possibly having to file Form 8938 but does not mention FBAR, whereas it looks the other way around.

[pk]

@rajeshh , since you have  ref'd the IRS comparison of  requirements  for FBAR and form 8938,  you are CORRECT in the interpretation that 

(a) FBAR specifically  includes   those accounts where one has only signatory powers  but does not operate the account.  And the threshold  is  much lower  ( US$10,000 )

(b) 8938  is  for ownership of specified  assets  ( essentially   liquid or semiliquid assets , excluding  immovable assets like real-estate ) and the threshold is much higher ( dependent on your filing status and  tax home ).   

Note the distinction here ---  if there is no income   you report on FBAR   ( whether signature  authority or ownership ) once you meet the threshold.    If there is income to be reported on your return ( then obviously you are not only signature authority but a beneficiary/owner )  the you file  8938 once you cross the threshold..

Does this make sense ?

[rajeshh]

Thank you. Yes, that makes sense. I was asking mainly because Form 8938 was mentioned in this earlier response:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/no-if-you-did-not-take-the-incom...

when FBAR seemed more appropriate for this thread:

[pk]

@rajeshh , what IRS is covering here are 

(a) for the big  value  foreign accounts owned  through 8938

(b) for the small value  ( / and / multiple small value )  accounts  owned or those with ONLY signature ( but not "owned" )  through FBAR.

(c) Note that  those  whom come under the  FATCA ) form 8938, they may still qualify for FBAR.

Today also most foreign  banks  and financial entities collaborate and share  info, with the US Treasury.

Thus , even when in  doubt , file the forms --- you don't want to attract the onerous  fins/penalties.  It is not a tax event  anyway

If I have satisfied  your query, please consider "accept the answer " and/or  upvote ---- if not , tell me how to earn it.

pk

[rajeshh]

Hello, yes that is satisfactory. I cannot find a way to accept it as best answer. Not sure if that's because there is already an accepted answer earlier.