I received 1042-S (income code 15) Chapter 3 and Exemption code 00. What to do with this form?

[pillitto]

I didn't now what to do but somehow I started reading PUB 1040, PUB 54, PUB 519 and now PUB 514 and finally arrived at this knowledgeable board. I am a resident alien for tax purpose and I have several questions.

1) What to do with this form?  The form says at the top, "Foreign Person's US Source of Income Subject to Withholding." I am a resident alien and have my mailing address in the US, although I'm living in Japan. If I don't use "Earned Foreign Income Exclusion," I am able to stop the withholding but it seems it takes about 6 months.

2) I'm kind of getting I may be able to get some tax credit for the withheld money in 2019. I think I can use this credit when I decide to relinquish my green card and pay outgoing tax for my IRAs but it'll be in the future not the tax year 2019. Still, should I get my tax credit by filling some form 1116 now?  Assuming if I am able to get my tax credit, I can keep it for a few years without using it?

3) Or I should wait  to receive my tax credit until I need it?

I've been filing my tax returns by the due date every year and all of which were very simple. This year, I was shocked to receive 1042-S. I've been feeling like a tired old-lady vagabond. Any help will be appreciated very much.

[hbl3973]

pillito,

According to the 1042-S list of codes and exemptions, that is listed as "pensions, annuities, alimony, and/or insurance premiums" without any treaty exclusion.  As a resident alien, you are generally responsible to pay US tax on your worldwide income unless there is some specific tax exemption such as a treaty.

So, I suggest some clarifications are in order:

a) More precisely, what was the source of the income that was reported on the 1042-S?  If it was, indeed, code 15, then it was not "earned income" and would not qualify for foreign earned income exclusion.

b) If pension income, e.g. a retirement account withdrawal, were you at least 59 1/2 years old at the time of the withdrawal?  If not, you may be subject to an additional 10% early withdrawal penalty unless you meet one of the execeptions in PUB 575.

c) On the 1042-S, what was the tax rate listed, if any, in box 3b?  And was income tax withheld in box 7a?

[pillitto]

hbl3973

When I saw your response, I was exhilarated!  Thank you very much!

a) The source of income was the 401k plan of a semiconductor company located in San Jose, California. I remember the company matched my contribution in this plan. (I studied in the US and after college, I started working in the US until several years ago)

b) I withdrew it in 2019 and I'm well over 65 now!

c) I'm looking at box 3b of my 1042-S. It says "30.00" and in box 7, $ amount is in there, which is the amount of withheld.

Hope the above information would be helpful for you. 

I'm continuously thinking about this issue and kind of come up with one idea, which is like:  Since the title of the 1042-S is "Foreign Person's US Source Income Subject to Withholding," can I exploit this point for my advantage because I am a resident alien green card-wise? 

I'm looking forward to your response.

[hbl3973]

pillitto,

Don't know why the email notification didn't reach me, but based upon your updates, the answer is simple: 

You report the income under the 1099-R section of your US resident 1040 tax return.  Be sure to enter the 30% income tax figure in box 7 that was withheld in that same dialogue screen so that you don't end up paying that tax twice!

BTW, it is good that income tax was withheld!  In my volunteer work in the free IRS VITA/AARP TaxAide I've seen too many instances where none was withheld and the taxpayer was then hit with a large tax bill that included interest and underpayment penalties.