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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1408
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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I am a 77 year-old USA citizen in California since 1996 (naturalized)

Customer Question

I am a 77 year-old USA citizen in California since 1996 (naturalized) after living here as a permanent resident since 1975 when I moved from Japan. I have been a recipient of US SS benefit since I was 65.

Recently, I heard from the Japan Government that I was qualified for the national pension only for 5 years (due to the statute of limitations) preceding the application date which was June 20, 2011. In late November this year, a lump sum of X amount was deposited in my account in California. This was unexpected income, and I was not prepared to report in the coming tax returns by sending quaterly estimated taxes. I still have a chance to use the last quater, however I have to come up with an estimate.

My question: How is this income treated? Is the income totally taxable? Any particular form goes with it? Thank you much for your advice. Ken Aptos, California
Submitted: 5 years ago.
Category: Tax
Expert:  Jax Tax replied 5 years ago.

Jax Tax : This pay is equivilant to US social security and can actually reduce your benefits.
Jax Tax : However, not taxable.
Jax Tax : So long as you social security is not taxed.
JACUSTOMER-2zuo1tae- :

Do you mean that US SS benefit now I receive will be reduced because I receive the Japanese pension? If so, at what rate? Will you point out the specific IRS regulation relevant to this?

JACUSTOMER-2zuo1tae- :

Secondly, when I use the TAX software (H&R Block in my case), how should I report the money as income? There seems to be no appropriate place for that. It's certainly not part of US SS benefit, is it? Please advise me any relevant literature on this subject. Thanks. Ken

Jax Tax : Publication 901 and the US Japan tax treaty speak to this issue. I have gone through both. While most payment by Japan are not tax in the US, the pension is taxed if you live in the US and you are a US citizen or green card holder.
Jax Tax : If you meet these two criteria, the pending is taxed. It would be reported on the 1040 line 21.
Jax Tax : This is in conflict with most all other payments that come from Japan. I am not aware as to why the pension is excluded and taxed, but it clearly is if you live in the US and are a citizen of the US.
Jax Tax : If any tax was charged in Japan, make sure to include the credit on the US return.
Expert:  Jax Tax replied 5 years ago.
And, no it will not reduce your social security. It can but will not in your case.