Foreign Income from Government due to Child Birth - How to Declare, if needed?

[DTaxGuy]

Hello,

My wife and I will be filing jointly for the first time and she is a Romanian citizen now living in the USA since 2020.  She has a Social Security Number now as well.

My wife has been receiving monthly money from the Romanian government for the 2020 tax year because of the birth of our child in the form of child support.

Do we have to declare this income?  If yes, how do we do this?

[JeffreyR77]

Your worldwide income is subject to reporting and tax in the United States.  There does not appear to be any language in the US-Romania Tax Treaty that provides any relief from taxation in the United States from these payments.  Therefore these payments would be reportable and taxable in the US.  You can report it in TurboTax as Wages and Income, Less Common Income, Other Miscellaneous Income, Other Taxable Income:

You can also consider making estimated tax payments for both Federal and State tax liabilities. 

If your Romanian payments will continue throughout 2021, you can multiply the amount of the payments by your effective tax rate and make payments at www.irs.gov/payments and your state tax website.

[DTaxGuy]

Thanks for the quick reply.

Wouldn't this income be reported as Foreign Income and therefore on some Foreign Earned Income sheet?

Additionally, even though there is not a specific tax treaty for US and Romania, isn't there an option also to reduce my foreign earned income burden by at least some sort of method at all?

[LinaJ2020]

An international tax treaty-related question is out of our scope for advice, unfortunately.  You would need to seek a professional who is specialized in this matter for verification. 

If it is taxable to both US and Romania, you may claim a foreign tax credit on your US return.

Here are the steps: 

• Open up your TurboTax account and select Pick up where you left off
• At the right upper corner, in the search box, type in "foreign tax credit" and Enter
• Select Jump to foreign tax credit
• Follow prompts

If you have paid taxes to both foreign and the US tax authorities, the IRS allows you to claim a foreign tax credit on your US tax return.  It will show on line 1 Schedule 3 and line 20 of your Form 1040.