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Level 1

How to report interest income on foreign bank accounts

I have interest income of around 150$ from foreign bank account which I have to report in my tax return, where do I report it? Currently I have added it along with other Interest income from US bank accounts as a seperate row. I dont have 1099 INT form for this income since banks in India don't issue this. I have converted the INR to USD per rate conversion available on IRS website for FBAR.

I will file FBAR by the due date to report this account.
1 Best answer

Accepted Solutions
Employee Tax Expert

How to report interest income on foreign bank accounts

Please enter your foreign interest income AS IF you have received 1099-INT for it and enter interest income in box 1. If you paid any foreign taxes on the interest income, enter them in box 6 of 1099-INT form (be sure to indicate that you have more than just box on the form - see pic). And you are correct to do so in U.S. dollars.

  1. Federal Taxes
  2. Wages and Income
  3. Interest and Dividends, select Interest on 1099-INT

Note: You may have to file form Fincen 114, if your foreign account(s) exceed $10000 at any time during 2016.  You have to file it through the Treasury website: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

11 Replies
Employee Tax Expert

How to report interest income on foreign bank accounts

Please enter your foreign interest income AS IF you have received 1099-INT for it and enter interest income in box 1. If you paid any foreign taxes on the interest income, enter them in box 6 of 1099-INT form (be sure to indicate that you have more than just box on the form - see pic). And you are correct to do so in U.S. dollars.

  1. Federal Taxes
  2. Wages and Income
  3. Interest and Dividends, select Interest on 1099-INT

Note: You may have to file form Fincen 114, if your foreign account(s) exceed $10000 at any time during 2016.  You have to file it through the Treasury website: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Level 1

How to report interest income on foreign bank accounts

Thanks a lot for your detailed answer. I verified and updated the information, You're awesome.
Highlighted
Employee Tax Expert

How to report interest income on foreign bank accounts

Thank you and good luck in 2017!
d_p
Level 1

How to report interest income on foreign bank accounts

Hi, I did the same, but when I am filing mississippi state tax, payer id for these banks becomes mandatory, what to enter there? without payer id system do not allow to file and foreign banks do not have payer id. ???
Level 1

How to report interest income on foreign bank accounts

This explanation is very helpful.  Can something be done to amend the TT software to remove the confusing and misleading language?  When entering interest income the website says that if you have interest from something else - which would clearly seem to include foreign interest which is not on a 1099INT - it will be added later.  Despite this statement, the software does not provide the option to add foreign interest later.  It just loops back to the summary income page. (I suspect that what the wording meant to say is "later" in a different section, not in the current 1099INT section).  Even the "learn more" link for 1099INT does not mention that foreign interest income should be input in this section. The 1099INT section has a graphic image of the top of a 1099INT form as well as questions about various boxes on the 1099INT form, all of which creates the impression that without a 1099INT you are in the wrong place. The other alternative was to assume that foreign interest income might be input into the field for "foreign accounts" but again the TT software does not allow you to do this (this section is limited to form 8938 data input).  The easy solution would be to amend the wording on the 1099INT page to state that even without a 1099INT, foreign interest income should be added in this section. It seems quite simple to correct this (time consuming!) impression with a few extra words or some additional info in the "learn more" link.   Judging by the sheer number of questions on the Intuit website regarding foreign interest income this amendment would be time well spent. Again, thanks to TTML for the helpful clarification and explanation.
Level 1

How to report interest income on foreign bank accounts

Was there an answer to what should we add in the 'Payer ID of Federal tax ID number'? A foreign bank does not have a federal ID number from US
Level 1

How to report interest income on foreign bank accounts

I left the payer iD section blank.
Level 1

How to report interest income on foreign bank accounts

To go to Box 6 of 1099-INT, you should go to 1099-INT section and check the box "My form has information in more than just box 1". Then it shows all boxes. It took me an hor to find this.
Level 3

How to report interest income on foreign bank accounts

I have a follow up question about reporting interest income from foreign bank deposits. I incurred losses by investing money in fixed deposits in India due to changes in currency rate though banks deposited some interest.  The percentage loss incurred due to change in conversion rate (last year to this year) is more than the interest gain percentage.

Do I pay taxes for the interest income deposited by Indian bank though overall my bank balance when converted into USD this year is lower than last year’s balance even after including the interest income (no other debits or credits on the account other than interest income deposited).

Taking some numbers for example below.

 Last year, my bank balance was say 5,00,000 INR = 7843 USD (using exchange rate for 2017 noted in <a rel="nofollow" target="_blank" href="https://fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/historical.html">ht...>)
       Interest rate for this fixed deposit amount = 5%
       Current balance including interest income = 5,25,000 INR i.e. 7521 USD (using exchange rate for 2018 noted in <a rel="nofollow" target="_blank" href="https://fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/historical.html">ht...

       If I just look at interest deposited by the bank, I made interest income of 25,000 INR i.e 358 USD.  Am I supposed to pay tax on this income though overall there is a loss  (or) should I just report zero interest income (or) is there a way I can report the loss in this investment and reduce my tax liability from other investments/income I made in US.

PS: For the last 5+ years, I have been paying taxes by just converting interest deposited by bank in INR to USD without considering the losses due to falling INR conversion rate with respect to USD. However, it doesn’t feel reasonable. I may have overpaid in taxes
Level 1

How to report interest income on foreign bank accounts

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Level 5

How to report interest income on foreign bank accounts

I also have interest income of a forgein bank (Germany). It's about $17.52. If I enter this amount and click on "continue" button the amount automatically switches to $1,752.00. It does it all the time.  And it is just not right. I just received $17.52. That's it. What can I do?