Should I report unemployment benefits received from another country? I live in Germany and I received unemployment here, where do I include that on my taxes?

[Cindy0H]

Yes, you should. You can enter it as Miscellaneous Income, using these steps:

1.  Federal Taxes 
2.  Wages & Income  
3. Less Common Income click on the Start/Update box next to
4. Miscellaneous Income, 1099-A, 1099-C....start
5. Other reportable income..start
6.  Any Other Taxable Income? click the Yes box.  
7.  Other Taxable Income, enter a description and the amount.  Click Continue. 
8. The amount entered will appear on line 6 of the 1040 and line 21 of Schedule 1

You can claim a foreign earned income exclusion for foreign severance /unemployment income.

If you have more questions about this, ask in the comment box below.

[aliciab089]

how can my foreign unemployment pay, entered at Miscellaneos Income be claimed as a foreign earned income exclusion?

[TomD8]

The IRS does not consider unemployment compensation to be earned income.

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income

[TomD8]

I suggest you consult a local tax professional that specializes in American ex-pats.  I don't want to give you incorrect advice.

[Fnoumansana]

Hi,

Did you get a final answer?

I am interested as I am in a similar situation and getting conflicting information from different sources.

Thanks,

[ReneeM7122]

Yes, you should report foreign unemployment benefits from another country.  As the unemployment benefits are not foreign earned income, they are not eligible to be excluded from income on your U.S. tax return.

You can enter the foreign unemployment benefits as Miscellaneous Income, using these steps:

1. Click on Federal Taxes > Wages & Income  [If you're in TT Self-Employed:  Personal > Personal Income ]
2. In the Less Common Income section , click on the Start/Update box next to Miscellaneous Income, 1099-A, 1099-C.  [See Screenshot #1, below.]
3. On the Let's Work on Any Miscellaneous Income screen, click the Start/Update box next to Other reportable income. [Screenshot #2] 
4. On the screen, Any Other Taxable Income? click the Yes box.  [Screenshot #3]
5. On the next screen, Other Taxable Income, enter a description and the amount.  Click Continue.  [Screenshot #4]
6. The amount entered will appear on line 21 of the 1040.

@Fnoumansana

[Anonymous]

Do foreign unemployment benefits count towards the new 2020 unemployment compensation exemption of $10200, for reporting on Schedule 1, Lines 7 and 8?

I saw in the tax code:

" the term "unemployment compensation" means any amount received under a law of the United States or of a State which is in the nature of unemployment compensation."

Does this mean the unemployment compensation just has to match the nature of it, or has to be given by the US or a US state?

[DaveF1006]

No, the unemployment compensation needs to be paid by US or state sources. 

[ForeignTaxTom]

If unemployment benefits is not earned income, and one cant use F2555 foreign income exclusion help with double taxation, then can one use F1116 foreign tax credit to help with double taxation?  if so, how do you do that in Turbo Tax?  When i try , it creates "Generation Skipping tax" in error.   

Per  pub 514 page 7, bottom of first two columns says: 

 Income Tax
 A foreign levy is an income tax only if it meets both of the following requirements:
1. It is a tax; that is, you have to pay it and you get no specific economic benefit from paying it.
2. The predominant character of the tax is that of an income tax in the U.S. sense. 

A foreign levy may meet these requirements even if the foreign tax law differs from U.S. tax law. 

Unemployment payments:   A foreign tax imposed on an individual to pay for unemployment is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual.  

[DaveF1006]

It depends. I think you are reading into this more deeply than you should. If you paid taxes to Canada for your unemployment, you should receive a foreign tax credit. Here are your sequence of steps to declare this income and report the foreign taxes paid. 

1. Click on Federal 
2. Click on Wages and Income  
3. Click on I'll choose what I work on (if shown)
4. Scroll down to Less Common Income>Miscellaneous Income, 1099-A, 1099C
5. Scroll to other Reportable income>start
6. In the second screen in the description box, you will write Canadian Unemployment and then record the amount.

Now to report your Foreign Tax credit.

1. Go to federal>deductions and credits>estimate and other taxes paid
2. Foreign taxes >start
3. Start answering questions. Make sure you answer the question correctly about if this is the first year you are making the simplified  election
4. Answer the questions in the next screens until you reach a screen that talks about income type. This will be income resourced by treaty.   
5. Next screen is where you add the country your foreign income was earned in. 
6. Next screen will ask you what your source income earned in that country. Here you will list the income from your unemployment.
7. You will continue answering questions until you get to a screen that says foreign taxes paid to XXXX. Be sure not to list a date at the bottom beyond 12/31/2020 or you won't get the foreign tax credit and will show up as an error in your return

[Pulsewarm]

I had severance package income from a German employer (for which one can claim the Foreign Income Exclusion) but also unemployment compensation from Germany (for which one cannot claim the FEI but can claim a Foreign Tax Credit). Can I claim both the FEI and the Foreign Tax Credit in the same year?

Thanks.

[SweetieJean]

@Pulsewarm  This may help:

Foreign Earned Income Exclusion Vs Foreign Tax Credit - Remote Financial Planner

[sdtohh]

What you suggested does not work. You have to enter an "employer" for the tax credit. How am I supposed to list an unemployment agency here without lying? They are indeed not a company, and I did not do any work to receive the money. Any clarification on this? Or is TurboTax just not the right solution for this tax situation?

[Mike9241]

you report the UC it as miscellaneous/other income - schedule 1 line 8z (not 7)

then when you get to tax credits enter under foreign tax credits  - use the general category for the UC. 

read the questions carefully. 

if you have difficulties you may have to upgrade to live or use a professional service. Turbotax can handle FTC for foreign UC  but you have to answer the questions correctly. 

if you're using online you'll have to upgrade to at least deluxe.