Turkey Bank Account Interest & US Tax – IRS Tax on Turkish Interest (Golding & Golding)
Turkey Bank Account Interest & US Tax – IRS Tax on Turkish Interest
Turkish Bank Account Interest & US Tax: We have many clients in Turkey and/or the U.S. with Turkish assets, accounts, investments and income.
And, like many of our clients in countries around the world, our clients with bank accounts in Turkey have interest income being generated in their Turkish bank accounts.
Common banks include: Ziraat, Isbank, Garanti, AKBank and Yapi Kredi.
But, unlike many other countries, Turkey Fixed Deposits operate a bit differently (if not unnecessarily complicated) — which impacts IRS reporting.
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Turkish Fixed Deposit Bank Account Interest
Here is a common example we handle:
David is originally from Turkey. He owns real estate and other investments in Turkey. He also has 10 Bank accounts (primarily fixed deposits) that earn interest.
The basic operation of the Fixed Deposit in Turkey is still the same in most countries. A person deposits money into an FD (comparable to a U.S. “C.D.”) and it grows for a period of time.
Foreign Fixed Deposits are Taxable as they Accrue
Since the interest is accrued each year, the annual interest is taxable by the U.S. when it accrues. This is true, even if the money is not distributed. It is not taxed only at distribution or realization (which is a very common misconception).
Bigger Problem is Keeping Track of the Accounts in Turkey
It is commonplace in Turkey that each month after the account generates interest, the money is then transferred into a new account, which has a new account number.
Therefore, as you can imagine, if David has 10 accounts, over 5 Banks, the number of accounts may inadvertently grow to more than 100.
Former Turkish Bank Accounts do Not Close…
The prior accounts do not necessarily close. Rather, they sit dormant. Therefore, for U.S. purposes, they are reportable.
Double-Counting Makes the Accounts Look Larger
This is another common issue:
David has 1 account with $75,000. He files in the U.S. as Married Filing Jointly. The account is opened and transferred several times each year.
Now, David looks like he has $400,000 — which means he exceeds the Form 8938 reporting requirements, and due to no fault of his own, the U.S. offshore account reporting will become infinitely more complicated.
David never reported this to the IRS. He is overwhelmed, and worried about getting into compliance.
We can help.
Golding & Golding, A PLC
We have successfully represented clients in more than 1,000 streamlined and voluntary disclosure submissions nationwide and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.