My wife, when she emigrated from Switzerland to the USA in 1976 was allowed to continue paying into the Swiss Social Security System (AHV). The amount paid was based on our joint income that was primarily from my wages. The payments were either by a check drawn from an American bank account or a transfer from a Swiss bank account. All the money paid in had been “after tax
.” There were no contributions by the Swiss government since she had no Swiss earned income from in the years of contribution.
However, she paid a Swiss income tax
(really a “wealth tax”) in the years of the Social Security contributions
. Part of this wealth tax was also based on my wages.
I am perplexed how the social security payments she received in 2011 should be treated and taxed. Part of the IRS code states that “foreign social security benefits are taxable as annuities (unless they are exempt from US tax or treated as a US Social Security benefit under a treaty)”., Are her social security payments considered an annuity? And if so, what percentage of it is taxable? Is this reported on line 16a of IRS Form 1040?
Or should it be reported on line 21, other income, “Swiss Social Security?” If it is to be reported on line 21, is it taxed as US social security, that is, 15% is not taxed no matter what the income?