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

Forum|Forum|5 years ago
February 5, 2021
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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!

TurboTax PLUS Online

linaj20201

Level 14

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.

Download and fill in a Form 8833 from IRS to claim an exception. https://www.irs.gov/pub/irs-pdf/f8833.pdf

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.

AdamaxAuthor

Level 2

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.

AdamaxAuthor

Level 2

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?