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Adamax
Returning Member

Where to declare distributions from a foreign "profit sharing" plan?

My previous company in France created on my behalf and made me took a distribution on a "profit sharing" company plan (participation/interessement) in 2020. 

 

1) I assume taking a distribution from a foreign profit sharing plan is a taxable event (even if it's a foreign one, since I qualify as US fiscal resident)?

 

2) If so, where in TurboTax do I declare it?

 

Please note I have not received any form from the broker that manages the profit sharing plan.

 

Thanks!

6 Replies
LinaJ2020
Expert Alumni

Where to declare distributions from a foreign "profit sharing" plan?

Generally, foreign pensions are taxable to US citizens or residents.  However, some foreign pensions might not be taxable if it is covered under any tax treaties between the foreign country and the United States.  In addition, tax treaty-related matters are out of scope for our advice.  I will suggest you to consult a specialized professional for verification. 

 

 

If your foreign pension is taxable, you will need to create a substitute form 1099-R. 

 

Here are the steps:

 

In TurboTax online,

  • Sign in to your account and select Pick up where you left off
  • At the right upper corner, type in 1099r, then Enter
  • Select Jump to 1099r
  • Follow prompts
  • Next screen, Choose your bank or brokerage, select I'll type it in myself
  • Follow prompts.  On the screen  Tell us if any of these uncommon situations apply 
  • Check the box I need to prepare a substitute 1099-R and follow the prompts.  

 

As to the Federal ID, most of the foreign pensions often do not have the ID number.  Please try entering nine 9s.  If electronic errors occur due to 1099-R data entry, enter the pension under Miscellaneous income, see instructions below. As long as the IRS has the pension reported and included in total income, it is not problematic. 

 

  • To your left, select Federal
  • From the top, select Wages and Income
  • Scroll down to last section -Less Common Income -select  Miscellaneous Income, 1099-A, 1099-C- Start 
  • Next screen, scroll down to Other Reportable Income- Start
  • Follow prompts

 For more information, see http://www.irs.gov/Businesses/The-Taxation-of-Foreign-Pension-and-Annuity-Distributions

  

If it is not taxable to you,

  • report your full amount as instructed above in the 1099R section. Then enter the treaty exempt amount as negative amount (e.g. -5000) under Other Reportable Income as instructed below.
  • You cannot e-file.  You may still use the TurboTax program to prepare all your tax forms, but you would need to print them out and submit by mail along with form 8833. 

 

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Adamax
Returning Member

Where to declare distributions from a foreign "profit sharing" plan?

Thank you for this. I've been following your instructions but I'm stuck at the "Distribution code" (Box 7). Since this is a foreign profit sharing plan, I am not sure any of the categories listed there are applicable.

Do you have any suggestions as to which one to pick? The only one that seems applicable is "Early distribution - no known exceptions" but I was forced to get an automatic full distribution by my foreign employer in order to comply with FATCA regulations.

Adamax
Returning Member

Where to declare distributions from a foreign "profit sharing" plan?

Another question: I filled out the substitute 1099-R form to the best of my abilities but TurboTax keeps saying it "needs review" (pic below) I clicked on "Review" and went through the prompts - when I finish I am still seeing "Needs review". Any help? Screen Shot 2021-02-28 at 1.24.07 PM.png

Adamax
Returning Member

Where to declare distributions from a foreign "profit sharing" plan?

Seems like the issue is with the TIN you suggested for the foreign entity (nine 9s), that's why it keeps saying "Needs review". Seems like I need to report my foreign profit sharing plan distribution under Misc income then?

Adamax
Returning Member

Where to declare distributions from a foreign "profit sharing" plan?

The IRS mentions that the 1099-MISC for may not be indicated for profit sharing distributions after all (see pic below), which leaves the question on how to report this on TurboTax if the TIN is unavailable and the 9 nines mock TIN doesn't work.

 

Screen Shot 2021-02-28 at 2.56.33 PM.png

Irene2805
Expert Alumni

Where to declare distributions from a foreign "profit sharing" plan?

You can enter the income as Miscellaneous Income using these steps.

  1. Click on Federal > Wages & Income   
  2. In the Less Common Income section , click on the Start/Update box next to Miscellaneous Income, 1099-A, 1099-COn the Miscellaneous Income screen, click on the Start/Revisit box next to Other reportable income. 
  3. On the Any Other Taxable Income? screen, click the Yes box.
  4. Add the income and description on the next screen, Other Taxable Income.
  5. This amount will appear on line 8 of the 1040 (Other Income from Schedule 1).

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