Hi, I had 2 questions about reporting foreign income when filing U.S tax returns :

1. For NRE savings and C.D. accounts held in Indian Rupees in India but from CITIBANK N.A, which is U.S. based and sends out 1099-INT, do we still have to report the total balance as of Dec 31, 2013 for FBAR? I know we can use 1099-INT for reporting the interest but wasn't sure about total balance reporting for FBAR.
2. For NRE accounts held in Indian banks that DO NOT send 1099-INT, do we report 'interest accrued' or 'interest paid' for C.D accounts for filing taxes? How about the total balance for FBAR reporting? Should we use 'interest accrued' or 'interest paid' to calculate the total balance as of Dec 31, 2013?

1) Even though the account interest is reported under Form 1099-INT, the highest balance in the foreign account STILL must be reported on the FBAR.

2) Include all accrued interest when determining the highest balance for FBAR purposes.

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Originally Posted by AtlantaTaxExpert

1) Even though the account interest is reported under Form 1099-INT, the highest balance in the foreign account STILL must be reported on the FBAR.

2) Include all accrued interest when determining the highest balance for FBAR purposes.

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Thank you.
For #2, does that mean we use interest 'accrued but not paid' for FBAR calculation and interest 'paid' for reporting taxable income? Do we use the foreign exchange rate on Dec 31, 2013 to determine the equivalent USD to report? For FBAR, do we report the balance as of Dec 31, 2013?

You report the highest balance at ANY point of the year, but you use the 31 December 2013 exchange rate to report that balance on the FBAR.

All interest that is accrued for a CD with a period > 1 year must be reported as income, and taxes must be paid on that. This is per IRS rules regarding multi-year CDs.

If you check your Citibank 1099s, you will see that interest accrued on a CD with a period > 1 year is reported. It may be in a 1099-OID rather than a 1099-INT, but it is reported.

For a CD with a period <=1 year, you can pay when the CD matures.

Quote:

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Originally Posted by madhoa

All interest that is accrued for a CD with a period > 1 year must be reported as income, and taxes must be paid on that. This is per IRS rules regarding multi-year CDs.

If you check your Citibank 1099s, you will see that interest accrued on a CD with a period > 1 year is reported. It may be in a 1099-OID rather than a 1099-INT, but it is reported.

For a CD with a period <=1 year, you can pay when the CD matures.

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Thank you ! So, even for FBAR reporting, do we use the same principle, that is, if the CD tenure is > 365 days, we use the opening balance + interest accrued (not yet paid) to calculate the total balance that we need to report?

The value of a CD on the FBAR would be what you would get for it if you cashed it in that year. Most financial institutions would require you FORFEIT the interest on an early cashout.