Retirement Income from a foreign country

[juham2013]

I saw similar posts, but I also believe that some of the suggestions might not help or work as foreign entities such as in my case do not have Federal ID numbers.  Some people suggested a string of "9"s but then I read that it might not work in this case.  I use TurboTax Home & Biz (not the on-line version).

Which form do I need to use to report fixed retirement income and how does one make sure that one gets credit for all the taxes paid on such retirement income?

Cheers,

JJ

[Opus 17 · Accepted solution]

Just report it as other miscellaneous taxable income.  There is no need to enter a fake 1099-R with a fake tax number.  

Separately, there are some situations where foreign retirement benefits that are considered similar to mandatory Social Security in the US might be subject to tax treaty provisions that affect where and how much tax you pay.  If you want to discuss that, you will need to tell us about the country and the benefit, your citizenship and residency status, and I will locate an expert to assist.  

[juham2013]

Hi,

I appreciate the response.   

I am a dual citizen, incidentally.

There is a bi-lateral tax pact between the U.S. and my country of origin, to avoid double-taxing.  According to the pact, taxes can levied by my country of origin only (pretty hefty taxes actually, given the modest nature of the retirement benefit).  That said, I doubt it that the IRS will add to that tax burden as I am going to declare that retirement benefit as "other miscellaneous taxable income."

Happy Holidays!

JJ

[Opus 17]

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@juham2013 wrote:

Hi,

I appreciate the response.   

I am a dual citizen, incidentally.

There is a bi-lateral tax pact between the U.S. and my country of origin, to avoid double-taxing.  According to the pact, taxes can levied by my country of origin only (pretty hefty taxes actually, given the modest nature of the retirement benefit).  That said, I doubt it that the IRS will add to that tax burden as I am going to declare that retirement benefit as "other miscellaneous taxable income."

Happy Holidays!

JJ

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If this is a government retirement plan similar to US social security, and subject to a tax treaty, then some complicated rules apply.  And I want to refer to another expert @pk

Basically as I understand it, you can either ignore the treaty, and treat the income as taxable in the US along with all your other taxable income.  Or, you can rely on the treaty and not pay tax on this income in the US, but then you must pay tax in the country of origin according to their tax laws.  

If the tax in the other country is higher, it seems sensible to ignore the treaty and only pay tax in the US.  However, if the other country has some means of taxing you or penalizing you (such as mandatory withholding or some other penalties) then you may be forced to pay tax in the home country, in which case you do not have to declare the income in the US.