HELP! US Tax Questions -

[geogman]

Hope you guys could shed some light on this:

1) So I am going to report my financial accounts on 90-22.01. But do I include credit card accounts and life insurance? If yes, the value I report is just ZERO right?

2) The interests I receive from these banks are, obviously, quite minimal -- just a few US dollars. Am I supposed to report all these in the Schedule B of Form 1040?

3) Do these interest incomes count towards my total income under "Foreign Income Exclusion"??? Are they taxed at all??? I am confused!

Please help guys, I am really confused by all these US tax thingy.

[nassaugirl]

To be honest, I would go and see a US tax accountant. That tax system is so fiendish that you could easily end up with problems. Its expensive for sure but worth it.

[Lootoo]

"Treasury Form TD F 90-22.1", to be precise. Yes, one of my favourites...

1) "Financial Account.

A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions)."

Based on that, I'd say the only insurance policy you would need to include would be a "whole life" policy, not a term policy. Credit cards do not seem to fit any of the above--do you have a credit balance on your credit card? The value you report is the highest it has ever been during the past year, not the ending balance. This bit, which was not part of the Form when it was first introduced, requires you to review every monthly statement during the year (for each account--I have about a dozen in three foreign countries, sadly, only one of which has any money in it) to find the point at which the balance was the highest. What fun! Even more fun if you transfer money from one foreign account to another: you get to record that value for both accounts!

2) Well, unless there is a de minimus exemption, I'd say yes, it is interest earned during the year (but you will need to convert it into US$ using some rate specified somewhere)...

3) I would think so. Why would it be excludable? The whole point of the TDF Form is to make sure that US persons are fully taxed on their hidden offshore millions.

I'm not an accountant, but that's what I'd do...

[penguinsix]

For the FBAR I think you only include life insurance polices that have a cash out value to them, not necessarily a term policy. (Hint google FBAR instead of 90-21.1 and you'll find many more hits). Not sure about credit cards.

2) I report every penny of interest just to be safe. It's not that big of a deal.

3) I would assume so. Why wouldn't you include it as income? However, if it is income from a bank in the US for an account in the US that is not considered foreign income as far as I know.

I second the recommendation that you contact a professional accountant. US taxes and bank account reporting laws (FBAR / FATCA) are incredibly annoying and complex. Some of the US expats in the UK have a running debate whether they have to report their Oyster (Octopus) card balances!

[dougmal]

If you don't want to try to find an accountant, you could always just buy a copy of turbo tax online. I haven't tried it yet with foreign income, but it's usually pretty good at explaining the questions and helping fill out the forms. Plus, i beleive it comes with customer service numbers for questions.

Sent from my VTAB1008 using GeoClicks Mobile

[ClueMinus]

I'm surprised that credit card balance are reported. They are debt and not income, why would Uncle Sam care about them? I never report my credit card balance and nothing ever happened.

Also, correct me if I'm wrong, but I have always been under the impression that there is a minimum amount for bank interest, or for that matter, any profits, before you need to report them, but the exact amount escapes me. eg. if someone owes you US$25 and pays you back $30, IRS doesn't really care about that US$5 "profit".

[Lootoo]

I'm surprised that credit card balance are reported. They are debt and not income, why would Uncle Sam care about them? I never report my credit card balance and nothing ever happened.

Only a CREDIT balance on a credit card would make any sense at all. (I've got one at the moment, due to a refund that came after I'd paid the debt balance in full.) But, as credit cards are not mentioned in the definition of "financial account" I quoted above, and do not share relevant characteristics with any of the examples cited, I won't be reporting it.

Also, correct me if I'm wrong, but I have always been under the impression that there is a minimum amount for bank interest, or for that matter, any profits, before you need to report them, but the exact amount escapes me. eg. if someone owes you US$25 and pays you back $30, IRS doesn't really care about that US$5 "profit".

I think you're wrong!

The Treasury form is completely different from a tax return. The instructions seem pretty clear, so unless you did not have an aggregate of $10,000 in your foreign financial accounts at any time during the calendar year, you need to report everything. Moreover, with new legislation like FATCA, there is an increasing liklihood that the government will learn about your foreign bank account from the Foreign Financial Institution holding it...

[spode]

Hope you guys could shed some light on this:

1) So I am going to report my financial accounts on 90-22.01. But do I include credit card accounts and life insurance? If yes, the value I report is just ZERO right?

2) The interests I receive from these banks are, obviously, quite minimal -- just a few US dollars. Am I supposed to report all these in the Schedule B of Form 1040?

3) Do these interest incomes count towards my total income under "Foreign Income Exclusion"??? Are they taxed at all??? I am confused!

Please help guys, I am really confused by all these US tax thingy.

Regarding #3 - Yes, the interest income counts as income. No, it does not count towards "Foreign Income Exclusion", as that is actually "Foreign Earned Income Exclusion" - only things like salary get deducted, not interest, capital gains, etc.

But I am not a tax expert, so don't quote me la!

-Spode

[spode]

If you don't want to try to find an accountant, you could always just buy a copy of turbo tax online. I haven't tried it yet with foreign income, but it's usually pretty good at explaining the questions and helping fill out the forms. Plus, i beleive it comes with customer service numbers for questions.
Sent from my VTAB1008 using GeoClicks Mobile

I have used their offline software several times in HK, and it works quite well for basic requirements.

One thing to note when trying to use the online service - payment is required by a credit card WITH A U.S. BILLING ADDRESS. Very very annoying. The first time I tried to use it, I went online and entered my data, and it told me what my tax bill would be, and it had a much lower value than what I had calculated manually. You have to pay to see the actual forms, and I tried to do so and discovered this gotcha.

Now I make a point of purchasing the software on disc while visiting family in the U.S. each year. You could probably buy it from Amazon or something as well - I have not tried yet.

-Spode

[AzureTaxHK]

Hope you guys could shed some light on this:

1) So I am going to report my financial accounts on 90-22.01. But do I include credit card accounts and life insurance? If yes, the value I report is just ZERO right?

2) The interests I receive from these banks are, obviously, quite minimal -- just a few US dollars. Am I supposed to report all these in the Schedule B of Form 1040?

3) Do these interest incomes count towards my total income under "Foreign Income Exclusion"??? Are they taxed at all??? I am confused!

Please help guys, I am really confused by all these US tax thingy.

1. You do not need to include credit card account and life insurance account on Form 90-22.01
2. Yes, you are supposed to report every single interest income in your US tax return.
3. No, the interest income does not count towards your foreign earned income. Only the salary income you earned from a foreign company is counted as your foreign earned income. Thus, worldwide interest income is taxable.