Hi, I was employed by an overseas company. As part of their incentive program, I bought some shares of my employer's stock (Swedish company, with brokerage firm based in Finland). If I hold these shares for 4 years, I will receive additional free shares, i.e. stock grants.
I bought shares in 2021 and 2022, and received dividends in 2022. The stock grants have not happened yet. It will happen in 2025 and 2026.
I already filed FBAR, but that's just a declaration, without any tax consequence. For this year's 1040 filing, under section "Interest and Dividends", and subsection "1099-OID, Foreign Accounts", I chose "owned a foreign bank, broker or financial account", then "yes" to the question "was the total value more than $10,000 during any time in 2022". It just said that "You need to file a FBAR". On the next screen, I chose "yes" to the question "I have foreign financial assets", but "no" to "lived in a foreign country". On the next screen, I answered that the total amount was less than $100,000. The software told me "based on what you told us, you don't need to report your foreign financial assets". It never even asked me how much dividends I received.
I want to understand the underlying tax law, instead of just trusting the software, so I am hoping the experts on this forum can share some insight with me.
From the Interview questions in the TT software, I am getting the impression that if the foreign financial assets is under $100k, any dividend/interest from the account is not taxable by US? Also, looking down the road, in 2024, when I do get the stock grants, if the total value goes above $100k, I will be required to report on the grants and the dividends?
"no" to "lived in a foreign country". this would seem to indicate you live in the US but work for a foreign company. US citizens are taxed on their worldwide income. dividends earned in a foreign brokerage account are taxable for US purposes. you should be entitled to a foreign tax credit for foreign income taxes paid on these dividends.
@Mike9241 Thank you for the response. You confirmed my original thoughts, but that's not what TT was doing. TT didn't ask me how much dividend I received from the foreign brokerage account, or how much foreign tax I paid on the dividend. It simply asked me if the total amount was less than $100k at the end of 2022. When I said "yes", it told me that I didn't need to report it.
I went back through the interview questions a couple of times to make sure I didn't miss anything. Any other suggestion?
That's is not the place where you enter foreign dividends. To properly enter foreign dividends and the taxes paid on it, follow this HERE
As far as your fbar requirements, because you have less than 10,000 in a foreign account there is no need to file an FBAR.
Thank you for the explanation. I understand now that I need to report the dividend as if I received a 1099-DIV.