I have a financial account in a foreign country, because I live there, which actually has a negative balance, but turbotax wants me to buy their deluxe package.

[GeoffreyG]

There may be a very simple solution to your issue.  If your foreign financial account(s) has a negative balance, and did not at any day during the year exceed the filing threshold dollar amount necessary to mandate disclosure reporting . . . then you can simply indicate to the TurboTax software that you had no such foreign account at all.  This would be consistent with the underlying tax laws, which only requires disclosure and reporting of accounts that are more valuable than certain dollar levels; and it would not require you then to upgrade to the TurboTax Deluxe (or higher) software version.

In the absence of that, you may indeed be required to upgrade TurboTax versions from the Free File edition, or to find an alternative method to file your income taxes.

In fact, there are two separate disclosure forms that may be required of US taxpayers who hold foreign financial accounts; 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.

Thank you for asking this important question.

[DaveF1006]

It depends. Means that you have one doesn't mean you need to report it unless you received interest or dividends from it.  There is no reporting requirement unless it is over $10,000 to report to FBAR or $50,000 to file form 8938.

If the program asks you to upgrade, ignore it.

@Silence 

[dhananjay]

@DaveF1006 what will happen if person has foreign accounts, receiving interest from accounts and still have not accumulated balance more than $10000 (including interest)? Should they choose free edition (by ignoring) or deluxe edition?

[DaveF1006]

It depends. If the balance of your accounts exceed $10,000 at any time during the year, you have a FBAR requirement to report to the US Dept of Treasury. You do not need to report this in Turbo Tax but you do need to report this separately with the US Treasury Dept. You would need to report it here.

Now if your foreign assets accounts reach more than $50,000 at anytime, then this is called a FATCA requirement, which requires form 8938.  This is handled through Turbo Tax and would require a Deluxe version to file.

In your instance, if your accounts are under $50,000, you do not need to report your foreign bank accounts in Turbo Tax and may stay in the free version. Keep cognizant of the fact at some point, you may have a FBAR requirement and you may access it with the link I provided in my opening paragraph. 

@dhananjay