Foreign Pension contribution refunded - taxable?

[skasa]

Hi! 

Short description: This year being US permanent resident I got my German pension contributions refunded from the time I wasn't considered as US person. Shall I include lump sum refund as "income" during tax filling for current year?

Details: Prior to move to US I was working in Germany for 3 years. This "limited" time of my German residency made me eligible to refund now my pension contributions done for German Pension and Social Security funds. Due to the fact I was not considered as US-person in any aspect I never filled any tax documents for US prior to my relocation. My income during German residency wasn't reported and wasn't taxed from US side. Only local German taxes been paid. 

In current situation my pension contributions from the time I wasn't considered as US-person are refunded (as lump-sum) at the moment I am considered as US-person.

I wonder if amount refunded should be included into tax filling for current year.

Similar cases: Most of the comments found on internet are written from perspective of US-person temporarily moved abroad and back. In such situation declaration of pension contributions refund as income is not required because US-person still had US tax filling in place while being abroad. In my specific situation I was not a US-person and IRS never saw those "abroad" income and contributions. Will they be interested to get taxes from the sum related to the time they had no jurisdiction on me?

Thank you for hints and comments!

[vithalanin]

As you are a US resident for taxation purposes, your contribution portion in the refund will not be taxable. Your contribution portion is considered as the cost of buying the pension plan. But the amount of income earned on the contribution you made will be taxable in the US even though this is a foreign contribution.  So let me give you an example to explain this, you received a refund of $13,500. Your contribution to the pension plan was $10,000. Then the difference of $3,500 is taxable income in the US as you received this income while residing in the US. Had you paid taxes on it in the foreign country, then on your US return, you could claim a foreign tax credit to avoid double taxation on the same income. Here is the IRS link to this information: 

https://www.irs.gov/businesses/the-taxation-of-foreign-pension-and-annuity-distributions