In: Accounting
In January 2018, Sonja Deposited $20,000 in a bank in the Bahamas. She earned $500 Interest income. She closed the Account in December 2018.
a. Is Sonja subject to the FBAR reporting requirement?
b. Is the Interest Income taxable in the United States?
a)Sona is subjected to FBAR requirement-
United States persons are required to file an FBAR if:
United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
b) Sonja must report interest earned on a foreign bank account as part of your worldwide income if you are one of these:
Report this interest with domestic interest income on Form 1040. You'll also file Schedule B if you had one of these for a financial account in a foreign country:
This applies even if you had less than $1,500 or more of total interest and/or dividends for the year. Convert the foreign currency into U.S. dollars at the current exchange rate when you receive the income. If there's more than one exchange rate, use the rate that most properly reflects the income.
The income might be taxable to both the United States and the foreign country. If so, you can claim a foreign tax credit on taxes paid to the other country.
Usually only U.S. citizens and resident aliens must include this income on their return. However, if you're identified as a U.S. person, you have to report foreign bank accounts to the IRS. This is true as long as both of these apply: