I still hold my UK savings bank account and nominal accrue interest each year. I am filing the FBAR to report my account details for the past couple of years.

Do I need to report the interest accrued while filing tax return? I was going to file using Turbotax but it wasnt clear where to put the information.

Presumably i have to sum up the tax accrued until 31st Dec 2015 on my UK account, convert to USD and report it.

Cheers

Yes, you need to report the interest you received on your UK savings bank account on your US tax return. You simply list it on 1040 Schedule B, along with US bank interest etc. But if your British bank interest was paid to you net of tax, you need to gross it up because of course you have to pay US income tax on the gross amount of interest income!

As for Turbotax, no idea, sorry. I simply file manually using the paper forms I pick up at the public library. At least that way you know what you're doing.

Sorry. I am a bit confused in what manner the interest needs to be reported. Turbotax ask me to fill information from 1099-INT (UK bank doesnt give that). So I rounded up the interest from the bank statements. And i dont understand whether:
a. They should be on some line number of the main 1040 form
b. They said be on Part I of the Schedule B form

My accrued interest is below 1500 USD. Turbotax mentioned the following.

"For tax year 2015, we'll attach Schedule B if your interest and dividend income exceeds $1,500. Otherwise, you don't need it."

Does it mean I dont need a schedule B even though the UK bank is earning interest?

You have a foreign bank account and according to your comment you must file an FBAR. You must complete Part III of Schedule B. It's possible TurboTax requires you to make a fake 1099 in order to make the software work. If you're paid 'net', the amount paid is 80% of the gross amount and you need to report gross proceeds.

I've created a 1099-INT for my UK bank interest every year for many years using Turbotax. Easy to do, and since the interest comes monthly I simply use the official IRS average conversion rate.

https://www.irs.gov/Individuals/Inte...Exchange-Rates

As mentioned above, if the interest has been paid net of UK tax then it needs to be grossed up.

Creating a 1099-INT without having an actual one is not that unusual since US banks are not required to send out 1099's if the interest is less than $10 but individuals still have to report and pay tax on all interest.

Seems so trivial, the most they get out of this is probably $4 . You would think they would just let you off that amount. You can't even buy a box of decent cereal for that in the US.

If the IRS excused $4 here and $4 there, soon it'd add up to real money, and the U.S. Government would start getting behind hand with infrastructure improvements, adequately funding social programs, paying America's fair share of UNICEF, etc.

Oh wait ....

Forget Turbotax and look at the actual 1040 and Schedule B, both of which are available as PDFs from the IRS.

Part one of Schedule B has multiple lines, maybe fifteen or more, because many people have several interest bearing accounts. You simply fill in the lines thus;

Bank A. $12.30
Bank B. $56.80
Building Society C. $49.45
(Etc)

Then you total the however many lines, and carry the total forward to the relevant line on the 1040 (you can round the total to whole dollars when you carry it forward to the 1040.)

You can of course use Turbotax to do the form filling and the arithmetic, but it's important to know what's happening under the hood...

The UK bank interest should be paid without any tax being withheld if the account owner live sin the US. If tax is being withheld it should be reclaimed from the UK.

As of today, we should be getting gross interest in our UK accounts. Should make life easier.

Yes, up to £1000 per annum, does vary slightly depending on your income but the vast majority will get the £1K allowance.

I still have a cash ISA with a bank in the UK. I initially forgot about the ISA interest when I initially filed my 2015 tax return, and later realized that I had made a mistake on another part of the tax return (am now expecting (even) more money to be refunded). I simply filed a 1040X tax return adjustment (and 540X for CA) and declared the ISA interest as 1040 Schedule B Part III income.