Foreign Bank Accounts

[AJT]

What is the name of your state? California

My wife and I are American citizens with my wife holding dual citizenship with New Zealand.
We have a joint checking and savings account in New Zealand with the funds originating as inheritance from my wife's mother's estate in New Zealand. We pay a New Zealand 10% Non Resident Tax on the interest earings of the savings account.
Question #1----------Are we required to complete a U.S. Tax Form TD F 90-22.1 "Report of Foreign Bank and Financial Accounts" and must we pay any U.S. Tax on these funds?
Question #2---------If any of these funds are wire transferred to the U.S. will there be any tax?
Question #3---------What if funds originating in the U.S. have been co-mingled with the New Zealand checking and savings account. Are there tax consequences?

 

[seniorjudge]

I fear that all three questions have the same answer: Yes.

(That NZ tax is a killer!)

 

[LdiJ]

What is the name of your state? California

My wife and I are American citizens with my wife holding dual citizenship with New Zealand.
We have a joint checking and savings account in New Zealand with the funds originating as inheritance from my wife's mother's estate in New Zealand. We pay a New Zealand 10% Non Resident Tax on the interest earings of the savings account.
Question #1----------Are we required to complete a U.S. Tax Form TD F 90-22.1 "Report of Foreign Bank and Financial Accounts" and must we pay any U.S. Tax on these funds?
Question #2---------If any of these funds are wire transferred to the U.S. will there be any tax?
Question #3---------What if funds originating in the U.S. have been co-mingled with the New Zealand checking and savings account. Are there tax consequences?

Yes, you have to report all interest earned on your US tax return, regardless of where that interest is earned. However, you will also recieve a credit for foreign taxes paid. Therefore that should avoid double taxation.

It doesn't matter if US funds are comingled with New Zealand funds, the end tax results will be the same.

Read this:

http://www.irs.gov/businesses/small/article/0,,id=148849,00.html

It will help you understand. However, I would strongly recommend that you use a tax professional to handle your US tax returns....in the end it will likely save you money if the amounts in the New Zealand account are substantial.

Oh, and no, transferring money to the US will not result in a taxable event. However, if you transfer more than about 100k, it would be a reportable event, even if not taxable.

 

[abezon]

What is the name of your state? California

My wife and I are American citizens with my wife holding dual citizenship with New Zealand.
We have a joint checking and savings account in New Zealand with the funds originating as inheritance from my wife's mother's estate in New Zealand. We pay a New Zealand 10% Non Resident Tax on the interest earings of the savings account.
Question #1----------Are we required to complete a U.S. Tax Form TD F 90-22.1 "Report of Foreign Bank and Financial Accounts" and must we pay any U.S. Tax on these funds?
Question #2---------If any of these funds are wire transferred to the U.S. will there be any tax?
Question #3---------What if funds originating in the U.S. have been co-mingled with the New Zealand checking and savings account. Are there tax consequences?

1a. Maybe. You have to file TD F 90-22.1 if your total foreign accounts exceeded $10,000 at any point during the year, even if no single account did. You also have to tick the foreign accounts box on Schedule B part III.

1b. Yes. US citizens pay tax on total worldwide income.

2. No. Since you're paying taxes regardless of the account location, moving the account will not affect your tax liability. Interest rate & exchange rate will be affected.

3. Doesn't matter.