Find content
Not Telling
Quote
I thought we are already taxed on the interest here as most banks deduct the tax before paying the interest. You must enter this on Schedule B and add it to your income? Do you have to fill out another form for foreign tax credit?
Fixed accounts usually have 15% withheld from interest earned. If you're a resident of Thailand, and have no earned income from Thai sources, this withheld 15% can be refunded from your local Amphur with little fuss (as I understand it -- haven't done it personally). Then, yes, since it is refundable by the Thais, you then have to include this interest earned with your other worldwide income on your Form 1040 . If you're still in the 15% tax bracket, it's a wash. If you've climbed to a higher bracket, that's the price of being an American.
Interest from Thai bank savings accounts, in my experience, do not have withheld taxes. However, this interest also has to be reported on your Form 1040. And, if your Schedule B also reflects having a foreign bank account(s) over $10k, you might think the IRS would expect to see some interest earnings from this sum of money (only the really bright agent would consider it possibly a one day transitory amount, passing through on its way to buying your new house). The fewer red flags, the better with this game.
If your'e part time in Thailand, the 15% withheld can be considered a final tax, but you can file for the foreign tax credit for this amount. But, you would still have to declare the interest on your 1040. This is a case of, you still have to pay (someone) the 15% tax, but in this case Thailand gets to keep the money (per tax agreement). And double taxation is avoided.
It would be simpler to do this as a resident of Thailand too. However, the IRS rules state that if you're not obligated to pay the tax to Thailand, then you can't pay it (or not ask for a refund), then file for a foreign tax credit. Now, if you had trouble, say, getting a statement of residence (required by the Amphur for the refund), or getting a run around with the Amphur, then I might be persuaded that going the tax credit route was just grey enough in this situation....
Bottom line -- yes, you have to show interest earned on your Thai bank accounts in your Federal tax filing. But, double taxation is avoided -- with a few extra steps.
Quote
It's getting more confusing and how are you supposed to know all these things?
Time to consult a pro, I would imagine. Your tax/FBAR situation seems to warrant it.
