US-Poland Treaty, article 20 and 21.

[Wookie78]

Hello,

US-Poland treaty in article 20 states that all Polish taxes imposed on my salary should be counted towards my US tax obligations. 
Article 21 par. 4 states that retirement contributions shall be considered as tax.

On my Polish pay stubs social tax is divided into four categories:

- retirement

- pension

- sickness insurance

- accident insurance 

All four are summed and subtracted from gross salary on my Polish tax return (called social security tax).

Does article 21 par 4 mean retirement contribution part of social security tax should be treated as tax and therefore is eligible for US tax credit?

Moreover article 21 par 1 says that US resident (Polish citizen) can’t be taxed at higher rates than US citizen would be. In the States employee contribution to retirement plan is tax free - does it confirm that all my Polish contributions to retirement plan shall be also tax free for IRS, meaning deducted from my Polish income or declared as tax credits? In Poland retirement system consists of two programs one mandatory (ZUS) and second voluntary (PPK) to both programs contributions are made from employee salary but to ZUS it’s pre tax and to PPK is subject to taxes.

Best,

Lukasz

[pk]

@Wookie78 , while I refresh my memory on US-Poland Tax Treaty, could please tell me the following:

(a) Are you a US person ( citizen/GreenCard/Resident for Tax Purposes )?

(b) Is your current tax home --US or Poland ?

(c)  If in Poland , are you employed by a local entity or a wholly owned subsidiary of MNC ?

( d) If your tax home is US, are you also receiving income from Poland ?  and if so for what ?

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

[Wookie78]

Many thanks for reaching out, below are answers to your questions:

(a) Are you a US person ( citizen/GreenCard/Resident for Tax Purposes )?

- resident for tax purposes (spent more than 183 days in US last year)

(b) Is your current tax home --US or Poland ?

- US

(c)  If in Poland , are you employed by a local entity or a wholly owned subsidiary of MNC ?

- until end of June 2025, employed in Poland (moved to US on the 29th of Jun), form 1st of July employed in  US by US companny.

( d) If your tax home is US, are you also receiving income from Poland ?  and if so for what ?

- income from Poland was only for duration of employment in Poland 01/01-06/30.2025

[pk]

@Wookie78  thank you for your response.  One more question:

During the years 2023,2024 did you spend any time in the USA ?  Or should I assume that your entry in the USA on July 1st. 2025  was your first legal entry.

I ask because if you had no prior stay in the USA, thus your  residency start date using SPT ( Substantial Presence Test ) would  July 1st 2025.  In that case as a dual status why are you concerned about your earnings in Poland prior to that date ?   Are you trying use  First Year Residency  -- exposing your Polish earnings to US  but being able tom use standard deduction ?   Are you married  and with dependents ?  What visa ?

[Wookie78]

In 2025 I spent one week of May in the States and in 2024 in total it might have been around a month. I moved to the States on 29th of June. Therefore, my time in the States in 2025 was more than 183 days. 

[Wookie78]

I'm married with two children, all three are with me in the States. To my understanding in my situation, I need to expose my Polish income to IRS and pay tax on my worldwide income, but this income includes retirement plan, which as stated in article 21 (4) of US-Poland Tax Treaty should be treated as tax. Which to me means should be used as tax credit the same way as paid in Poland tax from Polish wages on my US tax return.

[pk]

@Wookie78  so you are saying that for 2025 , May you visited on a visitor visa and then entered on Jun 29th. with work visa.

If that is the totality of it  then your residency start date would/should be  1st legal day of presence -- 06/29/2025.  This would lead to the the following:

(a) You file as Dual Status Filer 

( b) For the period 01/01/2025 through 06/28/2025 you file a form 1040-NR  ( TurboTax does not support this -- use SprinTax  / download the .pdf and fill in ) recognizing  ONLY US sourced /connected income.

(c) For the period 06/29/2025 through 12/31/2025 you file form 1040 ( TurboTax supports this ) covering world income.

(d) You mark the form 1040 with --"  DUAL STATUS FILER ", sign, date, attach the form 1040-NR ( signed / dated ) and mail the whole package to the IRS processing center for your area.

My ref. for this  ---   Residency starting and ending dates | Internal Revenue Service

Is there more I can do for you ?

[Wookie78]

May visit was on L1 working Visa if this changes anything.

[Wookie78]

I read about Dual-Aliens and still I can make a choice to be treated as resident alien for the whole year. If I make that choice, I can file a joint return if my status is Dual, I can't file joint return. To me more beneficial is joint return, therefore question remains - are my contributions to Polish retirement plan treated as paid tax and subject to US tax credit? 

[pk]

@Wookie78 , the only thing that may change is the actual start date of residency.   But in my view , keeping it simple is the best choice ---  thus still  using  dual status is still valid path. Besides it will avoid a lot of  tax treaty assertions / interpretations. 

The question really becomes when did you enter with the  L-1 visa -- not when you actually moved your family .  So if your entry to the USA with L-1 visa was  May1st. then that is when you became a resident.  If the US employment started on June 29th.,  then you still were a resident from the  May 1st.  What does your W-2 show -- does that cover the period May 1st or  only from June 29th. ?

[pk]

@Wookie78 , you are right , to be able to file joint return  ( and standard deduction ), you need the full calendar year plus  Tax id for each of the family members, world income of your spouse ----  is that what you are after?

For the tax treaty  --- what does this mean -- the one allowed  and one not  --

"  (4) In this Article the term "taxation" means taxes of every kind and description, with the
exception of the Treasury residence registration fee (oplata skarbowa za zameldowanie). The
contribution for the retirement fund (skladka na cele emerytalne) made by Polish citizens shall be
regarded as a tax."

Are these the ones you were referring to or what ?

[Wookie78]

Answer to both is yes.

[Wookie78]

Plus, article 21(1) states:

"A citizen of a Contracting State who is a resident of the other Contracting State shall not
be subject in the other Contracting State to any taxation or any requirement connected therewith
which is other or more burdensome than the taxation and connected requirements to which
citizens of that other Contracting State in the same circumstances are or may be subjected. "

Therefore, if contributions of US citizens to 401(k) plan are tax free my contributions to Polish retirement plan should also be not tax liable. In Poland there are two retirement plans - mandatory ("skladka emerytalna") and voluntary - PPK - contributions to both are coming from employee wages. 

[pk · Accepted solution]

@Wookie78    therefore you have your answer that the mandatory contribution ref'd  in my quote from the  tax treaty is to be viewed  as "tax" just like income tax. 

(1) For you to  file jointly and to be treated as resident for the whole calendar year you prepare your return on form 1040 , recognizing your world income ( from 01/01/2025 through 12/31/2025 ), include  your wife and her world income for the whole calendar year.

(2)  You both sign/date  a request to be treated as resident for the whole year -- see here

---> 2025 Publication 519  -

Pages 10 and 11 

"Statement required to make the first-year choice for 2025.

You must attach a statement to Form 1040 or 1040-SR to make the first-year choice for 2025. The statement must contain your name and address and specify the following.

• That you are making the first-year choice for 2025.

• That you were not a resident in 2024.

• That you are a resident under the substantial presence test in 2026.

• The number of days of presence in the United States during 2026.

• The date or dates of your 31-day period of presence and the period of continuous presence in the United States during 2025.

• The date or dates of absence from the United States during 2025 that you are treating as days of presence.

  You cannot file Form 1040 or 1040-SR or the statement until you meet the substantial presence test for 2026. If you have not met the test for 2026 as of April 15, 2026, you can request an extension of time for filing your 2025 Form 1040 or 1040-SR until a reasonable period after you have met that test. To request an extension to file until October 15, 2026, use Form 4868. You can file the paper form or use one of the electronic filing options explained in the Form 4868 instructions. You should pay with this extension the amount of tax you expect to owe for 2025 figured as if you were a nonresident alien the entire year. You can use Form 1040-NR to figure the tax. Enter the tax on Form 4868. If you do not pay the tax due, you will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty on the late payment.

  Once you make the first-year choice, you may not revoke it without the approval of the IRS.

  If you do not follow the procedures discussed here for making the first-year choice, you will be treated as a nonresident alien for all of 2025. However, this does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing procedures and significant steps to comply with the procedures."

  (3)  in TurboTax, you can go to the  "Deductions and Credits ", section and from the list of  credits  look for the  group that says " Estimated Taxes and  Foreign Tax Credits".  Choose the Foreign Credits and now  walk through TurboTax instructions/screens carefully to claim Foreign Tax Credit -- category general.  Note that the  form 1116 while recognizing dollar for dollar  foreign taxes paid ( on doubly taxed income ), limits the allowable Foreign Tax Credit to the lesser of  that actually paid and that imposed by the US --- the rest is available for carrying  ( backward 1 year or forward 10 years or till extinguished whichever is earlier) -- but requires  foreign source income for such usage.

Is there more I can do for you ?