Reporting foreign interest income and tax as 1099 without EIN? Do I need Form 1116?

You'll need to report both the interest income AND claim the foreign tax credit separately. Here's how to handle it: First, report the interest income on Schedule B (Interest and Ordinary Dividends) - this is where ALL interest income goes, whether from US or foreign sources. In your tax software, you'd typically enter this as "interest income without a 1099" and specify it's from a foreign bank. You won't have an EIN to enter, and that's perfectly fine. Then, to claim credit for the foreign taxes you paid, you'll need Form 1116 (Foreign Tax Credit). This is where you report the $110 in foreign taxes that were withheld. The form helps you calculate how much of that foreign tax you can claim as a credit against your US tax liability. You're definitely on the right track by keeping good records of both the interest earned and taxes withheld!

I just wanted to share my experience with reporting foreign interest income. I was in a similar situation last year and discovered taxr.ai (https://taxr.ai) which was super helpful for this exact issue. I had interest from accounts in two different countries and was completely confused about how to report everything correctly. The tool analyzed my foreign bank statements and automatically identified the interest payments and foreign taxes withheld, then showed me exactly how to report them in my tax software. It saved me so much time figuring out the conversion rates and separating interest from other transactions. Plus it gave me a clear breakdown for both the Schedule B reporting and Form 1116.

Just wanted to update after trying taxr.ai for my foreign accounts situation. I was skeptical (as you might have seen in my earlier comment), but I have to admit it actually worked really well. I have accounts in both Switzerland and Japan, and it correctly handled both the currency conversions and the different tax treaty provisions. It even flagged that I needed to do passive category income separation on Form 1116 since some of my foreign income was interest and some was dividends. Would have completely missed that on my own. Ended up saving me about $200 in foreign tax credits that I would have calculated incorrectly. Definitely using it again next year!

If you're also trying to call the IRS to ask questions about Form 1116 or foreign reporting requirements, good luck getting through! I spent WEEKS trying to get a human on the phone to answer questions about my foreign accounts. Eventually I found this service called Claimyr (https://claimyr.com) that got me through to an IRS agent in less than 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Honestly was a lifesaver because I had specific questions about reporting my Swedish bank account interest that wasn't covered clearly in any IRS publications. The IRS agent was able to confirm exactly how to report it and which boxes to check on Form 1116.

Alright, I need to eat my words about Claimyr being a scam. After waiting on hold with the IRS for 2+ hours three days in a row and never getting through, I tried the service out of desperation. Got connected to an actual IRS agent in about 15 minutes. The agent clarified exactly how to report my foreign bank interest from multiple countries and confirmed I needed separate Form 1116s for each type of income. This was info I couldn't find anywhere online. Saved me from potentially filing incorrectly and dealing with notices later. Worth every penny just for the peace of mind (not to mention not losing another day to hold music).

For your situation, don't forget about FATCA requirements too. If you have foreign financial assets above certain thresholds, you might need to file Form 8938 in addition to the FBAR mentioned earlier. The thresholds depend on your filing status and whether you live in the US or abroad. Also, make sure your tax software supports Form 1116. Some of the free versions don't include it, and you might need to upgrade to handle foreign tax situations properly.

How do you handle the exchange rate when calculating the foreign interest income? Do you use the rate on the day each interest payment was made, or can you use the annual average? I have monthly interest payments from my account in Australia and using different rates for each payment seems like a lot of work.

One thing to keep in mind is that if your foreign bank account is earning interest, you might also want to check if there are any withholding tax treaties between the US and the country where your bank is located. Some countries have agreements that reduce the withholding tax rate on interest paid to US residents. For example, if your account is in the UK, Canada, or Germany, there might be reduced withholding rates under the tax treaty. This could affect how much foreign tax you actually should have had withheld, and you might be able to claim a refund from the foreign country for any excess withholding. Also, double-check that the foreign taxes you're claiming on Form 1116 are actually creditable under US tax law. Generally, income taxes are creditable, but some fees or penalties might not qualify for the foreign tax credit.