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I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

 
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DS30
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

If you are a US citizen or resident alien, you need to include all worldwide income on your US tax return unless there is a specific exemption for such income.

According to the IRS, just as with domestic pensions or annuities, the taxable amount generally is the Gross Distribution minus the Cost (investment in the contract). Additionally, as a general rule, the pension/annuity articles of most tax treaties allow the country of residence (as determined by the residency article) to tax the pension or annuity under its domestic laws. This is true unless a treaty provision specifically amends that treatment. So if you are a resident of the US, this pension will be taxes under US tax laws (unless exempt under treaty)

Please refer to this IRS link for more information:

https://www.irs.gov/Businesses/The-Taxation-of-Foreign-Pension-and-Annuity-Distributions

Since this is not a South African governmental pension/annuity, you will need to include this SA annuity on your US tax

You would include this amount (in USD) on line 21 of your 1040. You enter this income under Federal Taxes> Wages and Income>I'll choose what I work on (jump to full list)> scroll down to "Less Common Income"> Miscellaneous Income (start/revisit/update)> Other reportable income (start/revisit/update) enter this information here as foreign (or South African) annuity income and the amount in USD (see screenshot) 

If you paid any SA taxes on this income, you would be able to take a  Foreign Tax Credit on your US tax return.  (See this link for additional information on how to Claim Foreign Tax Credit)

To enter your foreign taxes under Federal Taxes> Deductions and Credits >I'll choose what I work on (jump to full list)> scroll down to "Estimates and Other Tax Payments"> Foreign Taxes (start/revisit/update)

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

  1. you had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)


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10 Replies
DS30
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

Is this from a retirement fund? Was this a government provided annuity?

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

It was not a government provided annuity. It is a compulsory annuity I had to buy with funds from an employer pension scheme
DS30
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

Are you a US citizen or resident?
DS30
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

If you are a US citizen or resident alien, you need to include all worldwide income on your US tax return unless there is a specific exemption for such income.

According to the IRS, just as with domestic pensions or annuities, the taxable amount generally is the Gross Distribution minus the Cost (investment in the contract). Additionally, as a general rule, the pension/annuity articles of most tax treaties allow the country of residence (as determined by the residency article) to tax the pension or annuity under its domestic laws. This is true unless a treaty provision specifically amends that treatment. So if you are a resident of the US, this pension will be taxes under US tax laws (unless exempt under treaty)

Please refer to this IRS link for more information:

https://www.irs.gov/Businesses/The-Taxation-of-Foreign-Pension-and-Annuity-Distributions

Since this is not a South African governmental pension/annuity, you will need to include this SA annuity on your US tax

You would include this amount (in USD) on line 21 of your 1040. You enter this income under Federal Taxes> Wages and Income>I'll choose what I work on (jump to full list)> scroll down to "Less Common Income"> Miscellaneous Income (start/revisit/update)> Other reportable income (start/revisit/update) enter this information here as foreign (or South African) annuity income and the amount in USD (see screenshot) 

If you paid any SA taxes on this income, you would be able to take a  Foreign Tax Credit on your US tax return.  (See this link for additional information on how to Claim Foreign Tax Credit)

To enter your foreign taxes under Federal Taxes> Deductions and Credits >I'll choose what I work on (jump to full list)> scroll down to "Estimates and Other Tax Payments"> Foreign Taxes (start/revisit/update)

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

  1. you had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)


DS30
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

If your annuity was funded with pre-tax money, then the distribution will be fully taxable.

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

Thanks. You are being wonderfully helpful!  Another question. 2014 was the first year I received income from the annuity. Going through the Turbo tax steps on my 2014 return I generated a substitute 1099-R as the insurance company my annuity is with is South African, and they don't generate Form1099-R. I then entered the full amount ($16,000) as taxable on line 16b of my Form 1040. Do you know if it makes any difference whether the annuity income is entered on line 21, as opposed to line 16b on the Form 1040?

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

How do I know if the income I receive from the annuity is fully or partially taxed in the USA?  The annuity was funded in South Africa (I have dual citizenship) from my employer whose employment I left 16 years ago when I came to the USA. My and my employer contributions were pre-tax?
garthn555
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

In terms of the tax treaty with South Africa (which was specified in the original question)

 

https://www.irs.gov/pub/irs-trty/safrica.pdf

 

TAX CONVENTION WITH SOUTH AFRICA
GENERAL EFFECTIVE DATE UNDER ARTICLE 28: 1 JANUARY 1998
ARTICLE 18

 

is a non-government annuity taxed only in South Africa if the person is a resident alien in the USA? it appears to be so - perhaps better to ask the IRS (in writing).

garthn555
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

That's not how I read the treaty with South Africa. Perhaps if you can comment on that?

garthn555
New Member

I have an annuity in south Africa which is taxed at source. How do I show the income on my USA return?

Or does this mean the annuity is taxed by both countries? (which would be immoral to say the least)

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