This is a detailed response to your question, so we ask that you please be patient while we go through all of this issues raised by having foreign bank accounts.
With respect to how to report earnings on your foreign bank accounts, the answer is that you will
do this on a United States tax return just as you would as if the banks
were domestic in nature instead of foreign.
In
other words, whether or not you receive an actual US Form 1099-DIV (for
dividends) or Form 1099-INT (for interest) you will simply "pretend"
that you did, and proceed to enter your dividends and interest in that
manner. As such, you can can follow the mechanical data-entry
instructions for each type of passive income, as described in each of
the following links:
https://ttlc.intuit.com/questions/2952456-where-do-i-enter-my-1099-div
https://ttlc.intuit.com/questions/1899701-where-do-i-enter-form-1099-int
If you also paid any foreign taxes
on those dividends or interest, you can input that data on the very same
1099-DIV and 1099-INT input screens in TurboTax. There will be boxes
provided there, in which you can indicate any foreign taxes paid. (Note that you may be asked there to "check" a box or click a link to indicate that your 1099-DIV or 1099-INT has "additional" information . . . which would included foreign taxes paid.
Once this is done, you should proceed to the next step, which is applying a foreign tax credit to your tax return, based on the amount of the foreign taxes paid that you just entered in the previous data entry. To get started with that, you can follow the instructions at this link:
https://ttlc.intuit.com/questions/1901623
Now
then, reporting the income from your foreign financial accounts is one
thing. Reporting the existence of your foreign financial accounts is
entirely another. In other words, there is a "disclosure" requirement
for every US taxpayer who holds assets in a non-US account financial
account, even if the account or asset generates no taxable income. This
applies to mainland US citizens, territorial residents, and expats,
including those who never return to the US, but still maintain their US
citizenship. Essentially, the government wants to know about your
non-US assets -- how much and where you keep them.
In fact, there are two
separate disclosure forms that may be required; each also has different
reporting rules. One is known as IRS Form 8938, and can be
attached to the relevant yearly Form 1040 tax return. The other is FinCen
Form 114, which can only be filed via the internet. The following
Internal Revenue Service webpage describes them in some detail, and provides
their dollar value reporting levels:
https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements
Form 8938 is included in
TurboTax. FinCen Form 114 is not included in TurboTax, and you would need
to access that reporting webpage separately, if your foreign financial assets
total over the limit(s). Note that you can get to the FinCen reporting
internet site directly through the above IRS link.
Finally, please keep in mind that everything just explained only deals with US tax reporting and compliance matters. To the extent that there are taxes to pay or compliance forms to complete for the foreign country (or countries) involved, those matters are beyond the scope and purview of this advice. You are therefore respectfully advised to seek the additional advice of a tax professional with subject-matter knowledge specific to that country or countries.
Thank your for asking this important question.
