Social security benefits from Poland

[Pozorm]

Where and how do I enter Social security benefits from Poland? I am Polish/USA citizent. Is this income a passive  income for the 116 form? Where on the 1116 form do I enter my health tax I paid in Poland?

thank you

[Opus 17 · Accepted solution]

@pk

If there is a tax treaty between the US and Poland, and if this is a social benefit retirement scheme similar to US Social Security, the general rule is that you pay taxes on this income in Poland according to Polish law, and you do not pay taxes on this income in the US.   (You also can't get an offsetting credit for taxes paid to Poland, since the income is not taxable in the US, so you don't even use the 1116 form.)

You must still report any other world-wide income on your US tax return, such as investments in Poland, and you might be able to claim an offsetting credit for that.  

If you do not want to follow the treaty, then you would pay taxes in US, and you might be able to claim an offsetting credit.  But I don't see what the benefit would be of this strategy.

Our advice is that you should declare the Polish social security income on your US tax return and then add an adjustment to make it non-taxable.  There is a correct way to do this and a "good enough" way.   The correct procedure would be to enter an item of "miscellaneous income" in the amount of the foreign social security.  This would go on Schedule 1 line 8z with a notation like "Poland social security" or whatever the name.  Then, enter an item of negative income to offset the Poland social security. This goes on schedule 1 line 24z, you can give a reason like "Poland social security exempt by tax treaty."

However, you can only access schedule 1 line 24z by making a manual entry using Forms mode of Turbotax installed on your own computer from a CD or download (the desktop version). 

If you are using Turbotax online, you have to enter both the miscellaneous income and the negative offset in the same place, "other miscellaneous income".  This places both the income and the offset on line 8z.  This is not technically correct, but seems to be an acceptable answer and has been recommended in the past by Turbotax employees. 

[pk]

@Pozorm , having gone through this thread and generally agreeing with the comments/answers/suggestion of my colleague @Opus 17 , I would still like answers to the following questions:

(a) Are you currently in the USA or in Poland ? Is US your main home or do you also have a main home in Poland?  I ask because  US-Poland tax treaty refers to "citizen and resident" rather than just resident or citizen.

(b) The Social Security/Pension that you referring to in your post is based on govt. employment or private employment ?  I ask because the US-Poland tax treaty   refers to ONLY " Govt. functions " and not  specifically  "Social Security" while the US technical explanation refers/clarifies the " govt. functions" to include  Social Security equivalent etc.

(c) Is this your first year recognizing Polish pension/Social Security ?  How old are you  ?  ( more than 59-1/2 or 62 or 65  or what ?

US-Poland tax treaty is in many respects and outlier  and is quite old (1974) and with no updates and therefore needs a lot of parsing.

Note that general suggestions by my colleague @Opus 17   are still valid 

I will circle back once I hear from you --yes ?

[Pozorm]

Thank you for your answer and advice. I did not see your answer on time but I was able to finish my tax returns, which were filed and accepted.

I have done something similar to what you are saying: entered my Social Security benefits from Poland (Polish SSb) to other income/miscellaneous with a clear annotation what it is. Turbotax qualified my foreign earned income for the foreign income exclusion, reported my SSb on the Schedule 1, line 8z (Other income). All this led into 0 taxes for 2024. I will keep investigating what to do next year to make it "more right."

What I was thinking of doing is to use form 2555 for my earned foreign income and form 1116 for my Polish SSb. But it Iooks like it is not possible with Turbotax.

Where is it stated that if I "pay taxes on this income in Poland according to Polish law, and you do not pay taxes on this income in the US"? It would be great to know for the next year.

Thanks again.

[Pozorm]

Thank you for your answer.

Hear are my answers to your questions.

(a) Currently I live in Poland and I lived here for almost 2 years. Poland is my main home and I have no home or property in US. 

(b) I worked in the university. But Polish Social Security system is just like US Social Security system - all employed people must contribute to it.

(c) I am 64 and I started taking benefits in February 2024.

Actually, there is a newer US-Poland tax treaty that was published in February 2013:

https://home.treasury.gov/system/files/131/Treaty-Poland-2-13-2013.pdf

I am not quite sure why this document is not on the IRS page. At least I was unable to find it.

Thanks again

[pk · Accepted solution]

@Pozorm , agreeing with your comments . Here is what I find on the 2013 /14  tax treaty and specifically in the technical explanation as follows:

" The treatment of social security benefits is dealt with in paragraph 3. This paragraph
provides that, notwithstanding the provision of paragraph 1 under which private pensions are
taxable exclusively in the State of residence of the beneficial owner, payments made by one of
the Contracting States under the provisions of its social security or similar legislation to a resi
dent of the other Contracting State or to a citizen of the United States will be taxable only in the
Contracting State making the payment. The reference to U.S. citizens is necessary to ensure that
a social security payment by Poland to a U.S. citizen who is not resident in the United States will
not be taxable by the United States. "

So we are all in agreement now  i.e. how to treat  Polish Social Security payment.

Is there more I can do for you ?

[Pozorm]

Thank you!

Your comments are very helpful.

I really appreciate them.