carmen blue

I'm a USC and my British husband is a green card holder. We left the UK at the end of 2010 and we're now living in the States. We have money from the sale of our home in the UK and we were going to transfer it over here but we've decided to keep it over there for the time being because we may use a chunk of it to renovate my father in law's home. From the research I've done, it seems to make the most sense to put it into an offshore account so that it can earn some interest (it's earning nothing at the moment). I just want to make sure I do everything legally. Am I right in that all we would need to do is make sure we report it on the FBAR and 8938, and also report the interest on our tax return? Is that all?! I read scary stories about offshore accounts and I want to make sure I do everything by the book.

Secondly, one account we're looking at doesn't pay the interest until you close the account. If that is the case, presumably I wouldn't report any interest on our 1099 until we actually get it paid into our account, correct?

Finally, I know some of the accounts may only be protected up to £50k for example - I can't see anywhere where it says that that would exclude certain individuals. Does anyone know that, for example, the Isle of Man's compensation scheme would definitely cover us? I'm assuming it would, but just want to make sure.

Thanks in advance for all your wise words!

robin1234

Yup, that's it. A hassle, but not complicated or stressful. Just to be clear, as for interest that you receive during a year (e.g. 2012) you simply list it out in Pt. 1 of Schedule B, carry forward the total to Form 1040, and make sure you fill out Pt. 3 of Schedule B.

That's true. The year you receive interest, you report it & pay the tax on it. (I assume you meant to say 1040?)

IoM scheme is limited and problematic, but that is what you have to live with if you bank there. Yes, you'd be covered by it. You can divide the ££ into two or more accounts at different banks to make sure you are fully covered (within the limitations of the scheme.)

nun

I think you are in good shape. One point, you won't get a 1099-INT from any offshore bank. You'll have to report your interest income on your Schedule B and 1040 in the tax year that you receive it.

carmen blue

Thank you!

JackF

Hi all,

Unable to find a conclusive answer to this question, so any help anyone can provide would be appreciated.

If you have an account overseas with less than $1000 that accumulates no interest, and you wouldn't otherwise need a Schedule B, does it have be reported on Schedule B of your tax return? What if it accumulates minimal interest, say, under $5 per year? Would this amount just be reportable on your 1040 and not on a Schedule B?

Instructions indicate a schedule B is required for foreign accounts with absolutely any balance, but elsewhere online it seems to only been needed if the account accumulates interest (or over a certain amount of interest).

Does anyone have any experience of this?

nun

If you have signature authority over any foreign account you have to say so on Schedule B. Whether you have to the file an FBAR will depend on the amount in the account or accounts.

If you receive zero interest form your foreign account there there's nothing to enter in Part I of Schedule B. If you get $5 interest has to be entered in part 1,

JackF

Ah, I see. So even for small accounts with no interest, I have to use Schedule B and check the yes box. Is any follow up info then required? Assuming its under the $10,000 FBAR requirement and I wouldn't need to file that, would I have to complete additional paperwork to list account numbers/bank addresses etc? Or is it really just a matter of checking 'yes' and listing income/interest in part 1?

As a side note, does anyone know if regular credit cards fall into the foreign account reporting category?

Also, wouldn't it make more sense to have the foreign account question actually appear on the 1040 itself, rather than a supplemental sheet?

robin1234

"Making sense" and US government bureaucracy are two mutually exclusive categories.

theOAP

+1 (IMHO)

In the years prior to 2011, there was only one question in Part III, 7a, "do you have...signature authority over a financial account in a foreign country.." Sch. B was changed for the 2011 tax year, and now has two questions, the above, and "If 'yes', are you required to file (FBAR)...". It seems obvious the taxpayer is to complete Sch. B if they have a foreign account.

It will be interesting to see if Sch. B is changed yet again in future years as regards question 8 in Part III (those who receive a distribution from... a foreign trust). Does the receipt of a pension from a defined benefit final salary pension plan require completion of Form 3520 (IMHO, arguably no). So the possible inclusion of another yes/no question. Unfortunately, that would require the IRS to give clearer instructions for the filing of 3520. See robin 1234's excellent response directly above for an answer to that situation.

theOAP

My understanding (and it may be incorrect) is a credit card of any sort is included on FBAR only if during the year it had a positive balance. Debit cards do have a positive balance (the amount in the bank account). Most credit cards will carry a negative balance (you pay the card company from other funds once an amount becomes due).

This always leaves open the eternal discussion on the reporting of prepaid cards (yes, you declare them) and things like a travel card (Oyster, which some pros argue is not an account with a financial institution). Again, See the response from robin 1234.