foreign income

[Reithm01]

This year I started to receive a monthly pension of $ 421 from an employer retirement plan (Utrecht University, The Netherlands), and I received a lumpsum of $ 64,109  to make up for lost years.  The money is sent to me from The Netherlands by ABP,  a Dutch pension fund.  No taxes are being withheld in The Netherlands, and I was informed by the Dutch tax service  I cannot pay taxes on it in The Netherlands.  I am retired and single, and my sources of income are pensions and annuities and social security.  Are the monthly incomes from the Dutch pension and also the lumpsum fully taxable here in the US?  These amounts are simply added to my other income to calculate the tax due?

[vithalanin]

Foreign Pension is taxable in the US. You will enter it as if you received a 1099-R, even though you will not receive such a form from foreign countries. Even your lumpsum payment needs to be entered as a 1099-R income. As you have not paid any takes in Netherlands for this income, you will not get a foreign tax credit on them in the US. Had you paid taxes on this in the foreign country, you would claim a tax credit based on the tax treaty to avoid double taxation on the same income by reporting the foreign taxes paid in the Foreign tax credit section. To make the entry in turbo Tax, to report the pension, in Federal section, you would go to Wages and Income, then select Retirement Income and make the entry from there. Remember this income maybe subject to state taxes as well depending on your state of residency.

https://ttlc.intuit.com/community/taxes/discussion/it-s-impossible-to-receive-foreign-pension-tax-ex....

[Reithm01]

Thank you, Vithalanin.  I also have other pension income from the Dutch SVB (equivalent of the social security here) that started this year, again with a lumpsum.  Dutch tax is being withheld from the monthly amounts and from the lumpsum.  Am I correct in that I can claim foreign earned income tax exclusion on form 2555?

[K M W]

Hi, Reithm01.  To the extent that you are paying Dutch income taxes on the same income that is being taxed on your US tax return, you may be eligible to claim the Foreign Tax Credit, which would be reported on Form 1116 of your tax return.

You referenced Form 2555, which is the Foreign Earned Income form. You would use Form 2555 if you are a U.S. citizen living in a foreign country and have foreign earned income (and meet certain other rules).  The Form 2555 does NOT apply in your situation, as pension/social security is not considered earned income, and as you are not not living abroad.

So, although you would not exclude the income with the use of Form 2555, you do want to take the Foreign Tax Credit, using Form 1116.  The Foreign Tax Credit gives you a credit against your U.S. taxes for all or part of the foreign taxes  you pay on income taxed by both countries.

I hope that answers and clarifies your follow up question!