Foreign income while living in the US

[taxpayer27]

I live in the US now and am a US citizen, but I lived in Albania for many years before moving to the US.

I have two types of foreign income (Albania):

1. A government provided pension which is taxed by Albania already that I receive because of my retirement there (similar to social security here in the US).

2. Rent payments from a property I have there. 

Do I need to report both of these foreign income in my US taxes or only number 2? Does the fact that these are already taxed by Albania change anything? Which of the TurboTax products lets me do this properly?

I also have a bank there. Does TurboTax let me report my foreign bank as well?

Thanks!

[DanielV01 · Accepted solution]

Yes, TurboTax can assist you with all of these situations.  Unless you have self-employment income, you can probably use TurboTax Premier to handle your reporting (especially the rental income).

A U.S. citizen must report all worldwide income on a US-Resident Return (Form 1040).  (There is a provision to exclude Foreign Income when you are staying outside of the United States, but your situation does not appear to qualify for that exclusion).  Therefore, here is how your income is handled:

1. Unless you have a specific US-document to report your Foreign Pension income, you will report the pension as Miscellaneous Income.  If the income was not reported to you in USD equivalents, you will need to convert the reported currency into US dollar amounts.  If you are paying income tax on the pension to Albania, you are able to claim a Foreign Tax Credit (Form 1116) for those taxes.  Note the link to the instructions on how to do so below:
2. For your Rental Property, you will also claim the income using Schedule E, where you will also be able to claim deductions against your gains.  If you pay an income tax to Albania for the rental income, you may claim a Foreign Tax Credit for that also.  However, property taxes (or similar) would have to be claimed as a deduction against your rental income on Schedule E as well.  

Then, to claim the Foreign Tax Credit, follow these instructions found in the following TurboTax Community Help Article:  Claiming the Foreign Tax Credit 

TurboTax can point you in the right direction with any filing requirements if you have a FinCen 114 (FBAR) requirement and can prepare Form 8938 (FATCA) if you are required to file that form.  Nearing the end of the Federal Taxes and Income interview, you are asked if you are the owner of any Foreign Bank Accounts or have an interest in a Foreign Trust.  Answer yes to the appropriate question, and yes if the aggregate (combined) value of all accounts is (or was) $10,000 or more at any given point during the year.  This will trigger a FinCen 114 filing.  TurboTax by law cannot be used to file this Form (it is technically not a tax document), but will direct you to the correct website so that you may file the FBAR report yourself.  Form 8938 (FATCA) is, however, a part of the tax return (when required), so TurboTax will be able to assist you if that is necessary.

[taxpayer27]

Thank you so much! This is very clear!

A couple follow-up questions/clarifications:

1. Albania doesn't provide me with exact amounts on taxes deducted from my pension. I only know the amount I receive, not what the government automatically withholds. I can probably make an estimate on the tax that was withheld, but I wouldn't have an actual value. Can I still claim it on the Foreign Tax Credit or forget about it and enter the whole amount as is and get taxed twice?

2. Can I claim any deductions for the trips to Albania I make to check on my rental property and maintenance on them? I have receipts for the trips but don't have receipts for the maintenance expenses.

3. Can I file the FinCen 114 now (as it applies to me) or wait for the tax time?

Thank you again!