If you earned interest from a foreign bank account, investment account, or other financial account outside the United States, you generally must report it on your U.S. tax return. U.S. citizens and resident aliens are taxed on their worldwide income, which means foreign interest income is usually taxable even if:

• The money remains in the foreign account
• You never transferred the funds to the United States
• Foreign taxes were already withheld or paid

Reporting the income correctly is important because foreign financial accounts often trigger additional reporting requirements beyond your tax return.

Report Foreign Interest Income on Your Federal Tax Return

Foreign interest is generally reported the same way as domestic interest income.

To enter foreign interest income in the program:

1. Go to Federal
2. Select Income
3. Choose Select My Forms
4. Select 1099-INT and DIV
5. Answer Yes to the question asking whether you earned interest or dividend income
6. Select Interest Income (Form 1099-INT)

If you did not receive a Form 1099-INT from the foreign bank, you should still report the interest income using your account records.

Converting Foreign Currency

Foreign interest income must be reported in U.S. dollars. If the interest was earned in a foreign currency, convert the amount using an appropriate exchange rate for the tax year.

When Is Schedule B Required?

Foreign interest income is typically reported on Schedule B (Interest and Ordinary Dividends).

Schedule B is required if:

• Your total taxable interest and dividend income exceeds $1,500, or
• You have a financial interest in or signature authority over a foreign financial account

Even small amounts of foreign interest may require Schedule B because of the foreign account questions included on the form.

Foreign Account Questions on Schedule B

If you have a foreign financial account, you'll be asked additional questions regarding:

• Financial interest in a foreign account
• Signature authority over a foreign account
• Whether you're required to file an FBAR

To access these questions:

1. Go to Federal
2. Select Income
3. Choose Select My Forms
4. Select 1099-INT and DIV
5. Answer the question regarding foreign bank account interest

Be sure to answer these questions accurately, even if no additional forms are required.

Additional Foreign Reporting Requirements

Depending on the value of your foreign financial assets, you may need to file additional forms.

Form 8938 (FATCA)

You may need to file Form 8938, Statement of Specified Foreign Financial Assets, if your foreign assets exceed the applicable filing thresholds.

Foreign Tax Credit (Form 1116)

If foreign taxes were paid on the interest income, you may qualify for a Foreign Tax Credit using Form 1116, which may help reduce double taxation.

When Do You Need to File an FBAR?

In addition to reporting foreign interest on your tax return, you may be required to file an FBAR (FinCEN Form 114).

FBAR Filing Requirement

You generally must file an FBAR if:

• You are a U.S. person, and
• You have a financial interest in or authority over one or more foreign financial accounts, and
• The combined value of all foreign accounts exceeded $10,000 at any time during the year

Important FBAR Rules

• The $10,000 threshold applies to the aggregate balance of all foreign accounts combined.
• The requirement applies even if the balance exceeded $10,000 for only one day.
• The requirement applies even if the accounts earned no income.

Example

You have:

• Foreign savings account: $6,000
• Foreign investment account: $5,000

Combined balance: $11,000

Result:

• FBAR filing required
• Any interest earned must also be reported on Schedule B and Form 1040

FBAR Filing Information

Note: The software does not support filing FinCEN Form 114.

FBAR vs. Tax Return Reporting

It's helpful to understand that these are two separate reporting requirements.

Many taxpayers must file both.

Potential Penalties for Not Reporting

Failing to report foreign income or foreign accounts can result in significant penalties.

Possible consequences include:

• Additional tax assessments
• Accuracy-related penalties
• Penalties for failing to disclose foreign assets
• FBAR penalties for noncompliance

Because international reporting rules can be complex, taxpayers with substantial foreign assets may want to review their filing obligations carefully.

Best Practices for Foreign Interest Reporting

To make tax time easier:

• Keep records of all foreign accounts.
• Track interest earned throughout the year.
• Convert foreign income to U.S. dollars before reporting.
• Review Schedule B foreign account questions carefully.
• Monitor foreign account balances for FBAR filing requirements.
• Retain statements and supporting documentation with your tax records.

What to Remember

• Foreign interest income is generally taxable in the United States.
• U.S. taxpayers must report worldwide income, including foreign bank interest.
• Foreign interest is typically reported through the 1099-INT and DIV section and flows to Schedule B when required.
• Foreign accounts may trigger additional reporting, including FBAR and Form 8938 requirements.
• The FBAR filing threshold is an aggregate foreign account balance of more than $10,000 at any point during the year.
• Reporting the income and foreign accounts correctly can help you avoid costly penalties and IRS correspondence later.