FOREIGN (Korean) unemployment benefits -- how to report/best way to report

[shanesnh]

US Expat in Korea. I know my normal income qualifies for the FEIE.

I did receive unemployment benefits for a few months in Korea. I know that probably cannot be deducted but I don't know how to go about reporting Korean/FOREIGN unemployment benefits without any US forms. 

I received a few different possible ways to do so but I don't know the best/proper way to do it:

One said to either put it as general miscellaneous income and another said to put it as if I got a 1099-G or something. Another said to put it as miscellaneous income as "executor fees" are 3 ways and I'm not sure what to do. TIA!

[tagteam]

I will page Champ @pk for this. Please check back.

[pk]

@shanesnh ,  for US tax purposes you should treat this "unemployment benefit" just as if you had received it  in the USA  -- in the US case it behaves like passive income ( i.e. does not attract  FICA taxes  ) and shows up schedule-1 and onto  form 1040 -- just like other income.  So I would suggest  telling TurboTax that you have   unemployment  benefits  and no 1099-G.  It should work.

On refreshing my memory about the Tax Treaty between US and Korea,  (a) unemployment  benefit is not  directly dealt with,  (b) but there is a clause  allowing   ONLY Korea to  tax wages/remunerations/ etc. from public sources.   This kind of conflicts with the "saving clause" which allows each country to follow its own tax rules.  Because I am not sure of the sourcing of  Unemployment Benefit in Korea i.e. whether it is an insurance paid by the employer or it is from public sources.   Hence , if Korea taxes this income then it may be eligible for foreign tax credit ( because  it is not active income and therefore  generally  would not be included in the Foreign Earned Income  Exclusion) as passive income like interest/dividend/ capital gain etc.

Does this help ?   Is there more I can do for you ?

[shanesnh]

Thanks.

Someone had mentioned that if I do this, it's going to ask for the state but there is no state because it's another country. And another user said to report it on line 8z instead of line 7 because it says that line 7 income "should receive a form 1099-G" in the instructions but they also said probably both are okay. I'm not sure which one is easier and best and which one will be easiest to do in the app as well. 

Any additional advice? 

[pk]

@shanesnh , i tried your situation -- foreign earned income ( exclusion ) plus unemployment benefits without 1099-G).   I  chose unemployment and without 1099-G, then entered the details but no state name  and/or address / state ID etc.  After running the federal check it saw no error and ready for e-file.  I used Windows  Home & Business  TurboTax fully updated.

So it should work.  If you are using the on-line version ( and I have no knowledge / experience on ) it should work similarly.

Is there more I can do for you ?

[shanesnh]

Thanks so much.

Since my wife is NRA, I'll have to unfortunately print it out and mail in the return for the first time.

You think it will be okay?

And what do you think about this other opinion of another member for this situation because I get a bit nervous when I have to file taxes on TurboTax.

[pk]

@shanesnh , I have no fundamental issue with either using the method I used or  the suggestion you referred to.  However, as I pointed out  before  if the unemployment benefit is  not  through an insurance / private source etc. and from public funds then  per the treaty it could be interpreted as  " ONLY Taxable " by the contracting state issuing the  distribution.  I don't know  ( but can find out more  )  as to whether this is a general benefit  for all unemployed or just as part of employment.

On your spouse being NRA ---   including her  ( i.e. filing a joint return )  would expose her Korea income to US taxes --  but of course you each can  use the Foreign Earned Income Exclusion.

[shanesnh]

I see. It is public unemployment insurance benefits from the Korean government. So, would line 7 be better or 8z in your opinion? Or, it probably doesn't matter?

Also, my wife is an NRA like you mentioned and has never even set foot in the US so I'm certainly not putting her on my taxes. I will file MFS and write in NRA in lieu of an SSN/ITIN. 

Is there anything else I should know? (This is my first time having to file since being married). Thanks!

[shanesnh]

@pk 

I'm trying to do it now but TurboTax is asking me in this format (asking if I received a Form 1099-G or not) and if I say no, it goes to "uncommon unemployment benefits".

Am I supposed to pretend like I did get a 1099-G on the first page or say no (like I did below) and do something on the second page? TIA.

EDIT: If you select no 1099-G, and then select yes to the second page, it asks you to enter the amounts on the third page which don't match my foreign unemployment situation.

[pk]

@shanesnh , when I simulated your case  ( for reporting unemployment income/benefits ) , I pretended  to have received a 1099-G ---  name of the   issue/ payor of the funds, address etc. all showed foreign entries, left the state blank ( because it allows only US states ) etc. etc.   There were no issues on TurboTax checks.   However , you could probably do the same by claiming no 1099-G and entering as  private or union based un-employment.   All you are trying to do is to recognize the benefit as taxable income and categorize this as un-employment benefit.

Is there more I can do for you ?