Foreign retirement plan (non treaty country) loss in 2021 - non distributions allowed due to age- How do I report losses?

[Dub74]

I have this account when I worked overseas for over 10 years and it was mandatory to participate in the plan (Local Gov. mandate). After becoming US resident I started to report this account on my tax returns filling out 8938 and taking this account pretty much as a regular bank account and the gains reported as income and paying taxes on gains despite they are not eligible to any distribution because the legal age to withdraw money is 62. 

In 2022 this account lost value due to the whole economic crisis (lost value in local currency not necessary to the exchange rate). Now I don't know how can I report losses if I haven't sold the assets.  I feel this is a vicious cycle where we pay if it gains but cannot claim losses because the assets are still under my name and haven't been cashed.

If I put  the loss amount in the field  available for gain/losses instead of the field for interest, the program does not change the amount of my return. is this because my gains in the US are higher than the foreign losses?

I cannot use dividends because the plan is not a stock plan.

Thank you for any help on this matter. unfortunately there is no hope on having a tax treaty with the country that I am originally from.  I don't want to do anything wrong on my return. any advice is appreciated 

[DaveF1006]

You cannot report a loss of value in a retirement account or other investment accounts unless these become totally worthless. If you try to factor this into to your return, it is incorrect. It may be a vicious cycle but you still need to pay tax on the interest and dividends that are reported as being paid to you from your retirement account.

When you say when you put the losses in the area you mentioned, are you talking about the loss in value of your retirement account? if so, you may wish to remove it in case if you are audited for reporting this.

In answer to your question about the amount changing in your return, if you had a capital loss in your return, it is only limited to $3000 this year and the remainder is a carryover indefinitely until it is used up. You may have already reached that threshold of the $3000 capital loss before you entered the loss of value of your retirement account thus you would not experience a change in your return. just a larger capital loss carryover to be applied in future years before being used up.

[Dub74]

Thank you for your reply.  Now it is clear to me that I must not declare losses on foreign retirement plan.

it is a bit unfair that the IRS does not treat foreign retirement plans same as domestics, especially when we are forced to have and cannot get any distribution until retirement age. so basically we are getting punished getting taxed with gains every year and forfeit any losses when they occur. Paying Taxes on undistributed gains is for sure a punishment to people who had no choice to withdraw the funds even before becoming US residents.

Regards,