The following message was posted on a forum for Swiss citizens. What do the experts on this forum suggest?
"Hello, I am seeking expert advice for reporting Swiss social security benefits on USA tax forms.
Local tax experts were not expert enough to know about foreign pension and social security benefits.
I have now spent a lot of time reading but it is still confusing. I do not wish to be taxed if there is a treaty that protects but I believe the amount has to be nevertheless reported with mention of the treaty. (Not something feasible using Turboxtax online I guess.)"
According to tb snipped-for-privacy@example.invalid:
Here's the tax treaty:
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You should read the treaty and the technical explanation but thse bits of Article 19 seem fairly clear:
a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.
Notwithstanding paragraph 2, social security payments and other public pensions paid by a Contracting State to an individual who is a resident of the other Contracting State may be taxed in that other State. However, such payments may also be taxed in the first Contracting State according to the laws of that State, but the tax so charged shall not exceed 15 percent of the gross amount of the payment.
"Doctor, it hurts when I do this." "Stop doing that."
There may be someone supporting taxpayers trying to report foreign income through Turbotax who can help but it's very difficult to find tat kind of support. Those using Turbotax aren't paying for that kind of support.
Conclusion: Don't rely on obtaining straightforward help from Turbotax if the taxpayer has that kind of income to report.
To the extent it's reported, it's aggregated with other pensions and annuities on Lines 5a and 5b. There also may be reporting under FBAR and FATCA, forms I'm sure cannot be generated through your basic Turbotax subscription.
Nonrefundable foreign tax credits are on Schedule 3.
Yeah, there's a lot to read. Start with this summary of income that's subject to taxes (contributions) to either or both government pension systems.
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The summary documents from this tax law firm seem informative.
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How To Report Foreign Pension Income on a 1040 Form
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The Taxation of Foreign Pension and Annuity Distributions
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If I had a significant amount of income of this kind, I might hire an accountant who actually understands this stuff.
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