Hello.
There are two different answers to the original question here. One states to enter a substitute 1099R, the other advises to report the amount received from German social security (state pension) on the SSA-1099 in Turbotax. There are three problems here regarding which I would like further clarification, as I am helping someone with their taxes who also receives social security (state pension) income from the German government and is a full-time North Carolina resident and U.S. citizen:
1. Based on IRS Publication 915, it appears that filing this income on the SSA-1099 is correct, as it will then get entered on line 6a of Form 1040 and will be treated equivalently to U.S. Social Security. However, Turbotax Self-Employment only allowed for the submission of a single SSA-1099 this time, requiring us to add the German payment total to the total shown on the filer's U.S. SSA-1099. Will this not result in a discrepancy between what the IRS sees on the SSA-1099 and what the filer shows on their tax return? How should we handle this?
2. North Carolina taxes retirement income from local, state, and federal pensions as well as for qualified retirement plans, while social security and railroad benefits are not taxable by North Carolina. Does Publication 915 imply that the German social security should also be treated as social security benefits by North Carolina and therefore not incur NC state taxes? If so, then including the German social security payment on the SSA-1099 in Turbotax results in the correct outcome on the state tax return, while entering a substitute 1099R results in NC taxing the "German income" as retirement income.
3. Does Publication 915 apply to payments received from the German government as a surviving spouse as well as payments received for oneself?
The Turbotax program is not very helpful with this situation. I hope developers are working on incorporating more guidance for people in this situation in the future, for both federal and state income taxes.
Thank you.
