Doing tax return while on US home visit

[SpokaneAl]

If you use TruboTax or the like the questions will guide you and toss the numbers onto the correct forms, based on your answers to those questions. I suggest that you do not sweat what form(s) to use and just carefully work through the program and its interview questions.


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[skatewash]

26 minutes ago, smo said:

I am using TurboTax for both federal and state returns. It was smooth sailing until it asked about any “foreign financial assets” I answered “Yes” for “Do you have any…” and “No” for “Did you live in a foreign country?” Are these the proper answers (as opposed to correct)? The reason I answered “No” to the latter was I don’t want to file the 540NR for state return, as I still maintain a US address (as far as my US bank is concerned.) The truth is yes, I’ve been living in Thailand since 2014.

 

FWIW, I have been doing FBAR for the last couple of years so I’m good on that. I guess I will have to report the interest of my Thai bank accounts to the Interest and Dividends section of the return as stated in one of the screenshots?

 

My standard operating procedure when filing out tax forms is to tell the truth and see whether that gets me into trouble or not ;-)  In this particular case I don't think you have any reason not to answer truthfully.  If I remember correctly the "are you a US resident or not" question related to the foreign financial assets issue allows you to take advantage of higher threshold limits if you are a non-US resident than if you are a US resident.  In any case, I don't believe you are penalized in any way by truthfully answering that you are a non-US resident.  

 

Regarding the 540NR form:  if I remember your situation correctly, you were filing this year to get back money withheld from an IRA disbursement.  Are you required to file a state return every year?  I'm not sure an NR state form is covered by the free filing offers from TurboTax or TaxAct.  Other than that, is there any advantage to filing the regular state return rather than the NR one?  If you're really not a resident of the state then I would be inclined to file the NR state return.  Whether the tax software cross-references your yes answer to the non-US resident foreign financial asset question to the use of a regular state income tax return is something I don't know.

Maintaining a US address is something very many non-US resident expats do.  They almost have to if they want to keep their US financial institution accounts.  It doesn't preclude them being non-US residents.  That's what I do.  I live in Thailand and maintain a US address for the purpose of keeping my US financial institution accounts open.

 

As for whether you as a US citizen need to declare any foreign interest you earn, I'm afraid that's indeed one of the obligations.  US citizens are taxed on their worldwide income.  So yes, it needs to be declared as income on your 1040.  That is indeed something that can easily be checked by the authorities:  Your FBAR says you had $xx,xxx in a foreign bank account and your 1040 tax returns indicates no interest from that foreign bank account.  Certainly that's possible, but I imagine that may raise some flags.  And that's just the reconciliation from what you report yourself.  I wouldn't be surprised that Thai banks were reporting you income to the US government (through the Bank of Thailand), after all that is the purpose for them wanting to know your US SS# when you open a Thai bank account.  I report all the income I receive from the Thai banks that I report on my FBAR.  I also report the amount of interest income I am refunded by the Thai government that is withheld on some of my fixed savings accounts.

[smo]

On 2/20/2017 at 9:20 PM, skatewash said:

 

Regarding the 540NR form:  if I remember your situation correctly, you were filing this year to get back money withheld from an IRA disbursement.  Are you required to file a state return every year?  I'm not sure an NR state form is covered by the free filing offers from TurboTax or TaxAct.  Other than that, is there any advantage to filing the regular state return rather than the NR one?  If you're really not a resident of the state then I would be inclined to file the NR state return.  Whether the tax software cross-references your yes answer to the non-US resident foreign financial asset question to the use of a regular state income tax return is something I don't know.
 

Somewhere earlier on this thread it’s been mentioned that filing a state 540NR is rather cumbersome (when do you live in, when do you live out?) so the lazy in me just wanted to avoid it if I could. You remember correctly, I only file this year (state or otherwise) simply because I wanted to get back the tax withholding that I meted out unwittingly during my IRA withdrawal transaction. Bottom line I’m not averse to telling the truth, and as I have filed FBAR last couple of years in a timely manner, I’m hiding nothing.

Fact is, there isn’t much to hide to begin with: my credit union told me that they’re not sending me a 1099-INT this year because my interest falls below the minimum of 10 bucks!  It’s just that I haven’t filed tax returns for a number of years and  kinda lost touch with what goes in and what goes out so to speak. Maybe my questions made the matter seem more complicated that it is, and therefore it sounded like I had something to hide. (And now it sounds like I’m on the defensive, but I have no reason to be. Just wanted to un-muddle the water, shall we say )

Regarding interest on my foreign bank accounts, more or less the same story, maybe a bit more than 10 bucks (I never bothered to figure out the amounts in dollar), but nowhere near enough to bump me above the hoi polloi of the do-not-bother-to-file category; so normally I would go year after year without filing returns  - but in the future I will make effort to file nevertheless, as the concensus here says it’s better to do so. Again thank you all for chipping in, especially skatewash for taking the time to give me the lowdown on the situation.

[GinBoy2]

Maybe not filing is never a good thing, even if you don't owe a penny, it just keeps you in the system. Also if, for example as per Donald J Trump, you are carrying forward any capital loss, which you might want to use to offset a 401K tax withdrawal in the future, missing a year will lose you the carry forward,

 

...pretty sure Donald files every single year!

[smo]

After much shrafenfreuden (spelling? help! it's german for angst) I finally got my returns filed successfully thanks to my NBF(new best friend) TaxAct. I initially started with TaxACt, but then switched to TurboTax because it was more familiar to me, however right off the bat TurboTax wanted to charge for federal (filing 1040NR) simply because I declared my domicile abroad. So I went back to TaxAct and started all over again.

 

The detour with TurboTax helped me familiarize myself with taxing matters again, so the second time with TaxAct was a smooth ride, even enjoyable one thanks to its great user friendly interface. It also does great with the "morning after" ie what to do next to check on your return status ect. once filed and accepted. I can't recommend TaxAct enough.

 

My initial concerns were due to this being the first time I did return as an expat. My bank interest also threw me in a loop because I wanted to do the right thing and declare even though the sum is 10 bucks and some cents. That necessitated a couple of calls to my US credit union to firts, learn, second, confirm that they don't issue a 1099-INT for interest less than 10 dollars. The other issue that I did not have to deal with was interest on my thai bank accounts (which is also not much, but more than 10 bucks.) As it turned out (going through the steps with TaxAct), if I had less than 200K usd "offshore" then the IRS is not interested except for the FBAR thing (I have the feeling I might be wrong about or have misunderstood this matter). [re FBAR I read somewhere that they have moved the deadline to file to coincide with April 15?]

 

In summary, my returns were filed as 1040A and CA 540NR, at no charge with TaxAct and took me one evening to go through all the steps, and this morning to click on the e-file button. (The prep time for me is another matter). So thank you all again for your advice and inputs, especially khuns skatewash and gk10002000 for your very detailed explanations. Much appreciated. After all said and done, I'm glad for having gone through this refresher tax return filing experience. Wishing you all a good day.

[skatewash]

22 minutes ago, smo said:

My bank interest also threw me in a loop because I wanted to do the right thing and declare even though the sum is 10 bucks and some cents. That necessitated a couple of calls to my US credit union to firts, learn, second, confirm that they don't issue a 1099-INT for interest less than 10 dollars. The other issue that I did not have to deal with was interest on my thai bank accounts (which is also not much, but more than 10 bucks.) As it turned out (going through the steps with TaxAct), if I had less than 200K usd "offshore" then the IRS is not interested except for the FBAR thing (I have the feeling I might be wrong about or have misunderstood this matter). [re FBAR I read somewhere that they have moved the deadline to file to coincide with April 15?]

Congratulations!  Technically, all the interest you earn needs to be reported to the IRS on your income tax return.  It is true that financial institutions are not required to issue a 1099-INT for amounts less than $10, but those amounts are still interest you have earned and you are not exempt (unlike the financial institutions) from reporting it to the IRS.  The same goes for your interest earned in Thailand, it needs to be reported on the tax return as interest income.  

Now, the amounts that you haven't reported seem to be very small (less than $10 for the US bank, the amount is not clear for the Thai bank) and so you probably haven't under-reported your income by much.  Also, it's unlikely you will run afoul of whatever crosschecking the IRS does between 1099-INTs submitted by your financial institution and your tax return, as in the case of the US bank they didn't send it to the IRS and it's not at all clear that the IRS searches for interest paid to foreign account holders in Thailand (although they certainly could).  So, not sure I would lose a lot of sleep over not reporting the interest in this case, as it probably wouldn't affect the bottom line refund you were due.  However, if you are the sort that would lose sleep you could file an amended return (I believe TaxAct supports this).

Going forward though, you should know that you must report on your tax return any interest you have received whether or not you have received a 1099-INT or not.  Also, there's no exemption on reporting income earned outside the US.  The IRS taxes US citizens on their world-wide income, doesn't matter where it was earned.  If you earn interest income you must report it.  TaxAct asks at some point if you have another 1099-INT to report.  You should have entered one for your US bank (you are the account holder you should know the amount of interest you received in the account for the year, even though they were not required to send you a formal 1099-INT).  For the foreign interest income earned I enter 1099-INTs for my Thai bank even though, of course, they don't send me a 1099-INT.  In that case, you just need to enter the name and address of the bank, and the interest earned.  Your Thai bank is unlikely to have a Taxpayer Identification Number.(TIN) so you don't have to enter anything for that.

One of the purposes of FATCA and the FBAR is to get people to report their foreign income.  So, if you filed an FBAR for your Thai bank you would have indicated to FinCEN that you had foreign accounts worth over $10,000 and yet on your tax return you don't report any interest earned from foreign sources.  It's certainly possible for that to happen, but it is kind of a red flag, if the IRS is interested in pursuing that cross-check.  They may or may not do that now, but the infrastructure is in place for them to cross-check that in the future.

[ballbreaker]

I agree with skatewash that Thailand interest should have been reported. The 200k you mentioned is for FATCA threshold to file Form 8938.

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[smo]

22 hours ago, skatewash said:

Going forward though, you should know that you must report on your tax return any interest you have received whether or not you have received a 1099-INT or not.  Also, there's no exemption on reporting income earned outside the US.  The IRS taxes US citizens on their world-wide income, doesn't matter where it was earned.  If you earn interest income you must report it.  TaxAct asks at some point if you have another 1099-INT to report.  You should have entered one for your US bank (you are the account holder you should know the amount of interest you received in the account for the year, even though they were not required to send you a formal 1099-INT).  For the foreign interest income earned I enter 1099-INTs for my Thai bank even though, of course, they don't send me a 1099-INT.  In that case, you just need to enter the name and address of the bank, and the interest earned.  Your Thai bank is unlikely to have a Taxpayer Identification Number.(TIN) so you don't have to enter anything for that.

 

 

FWIW, I went through quite a bit of hand-wringing over the bank interest/1099-INT item. The fact that I contacted my bank not once, but twice regarding the issue shows my duly concern over the matter. Also part of my taking so long to do the tax was to calculate my Thai bank interests (updating the passbooks which I  rarely do so when I first put one in I had it faced down - getting the IRS end of year currency conversion rate - and doing the math which came to somewhere in the vicinity of 85 usd total) so when TaxAct asked for it I had all the numbers ready. But it never did. And truth be told, I was more than once on the verge of filling in the non-existent 1099-INT from my US bank only to back off at the gate because I didn't want to be accused of fraud ("why did you make up a non-existing document? you signed to be telling the truth didn't you?"- voice of IRS). At the end of the day, I under reported my income by less than 100 usd.

 

Nah, I won't lose sleep over this, but I'm more excited than ever about going back to the States and wringing the neck of the teller who insisted that I left off the 10% tax holding. But considering I won't be going back there anytime soon, by the time I land in US soil next he probably has left his post to become our next POTUS. Oh, well, but thank you so much for deciphering the bank interest issue for me and yeah, next year when comes tax time, I will definitely do the right thing.

 

[An interesting sidenote - what if in a few years, I will start getting "slightly" senile and won't be able to do all this on my own? Time to check out the legal services advertissements on Thaivisa webpage?]

Edited March 15, 2017 by smo

[smo]

Final update - the State refund came on the 17th (3 days after filing); Federal the 24th (a week after filing). Courtesy of TaxAct, totally free of charge!