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I am receiving some income from a foreign government "social…

I am receiving some income...
I am receiving some income from a foreign government "social security-type" benefit program. Where should I report this income in my Tax Return? Should I report it as "Other Foreign Financial Assets"?
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10/8/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,641
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

In order to better assist you, please let me know what country are you receiving the benefits from? The benefits may or may not be taxable depending upon certain circumstances.

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Customer reply replied 7 months ago
Hi Angela,
I ma receiving the benefits from Colombia. The benefits consist in an age, disability and death pension paid in a monthly basis by the Colombian Governmental Pension Administrator entity.Thanks for your prompt reply.

You are welcome. I just checked, there is not a tax treaty between the U.S. and Columbia, nor is there a Totalization (Social Security Agreement) between the U.S. and Columbia, which means that your pension is taxable here in the U.S. You may be required to file the Form 8938 as well. SEE BELOW:

------------------------

Foreign Social Security Pensions
Most income tax treaties have special rules for social security payments. In many cases, foreign social security payments are taxable by the country making the payments. Unless specified otherwise in an income tax treaty, foreign social security pensions are generally taxed as if they were foreign pensions or foreign annuities. Unless a tax treaty allows it (see, e.g., the USA-Canada treaty), they are not eligible for exclusion from taxable income the way a U.S. social security pension might be.

REFERENCE SOURCE:

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

----------------------------

Reporting Requirements

The reporting requirements for foreign pensions can be quite tricky, as there may be additional requirements on top of simply reporting employer contributions to foreign pensions and income earned from the pensions on your US tax return. You may also need to utilize the following forms, depending on your specific situation:

  • Form 3520 – This form is required if you have any transactions with a foreign trust
  • Form 3520-A – This form is required for trustees, and includes information the grantor needs in order to file Form 3520
  • Form 8621 – This form is required if PFIC rules apply
  • Form 8938 – This form is required to report all foreign financial assets, including foreign pensions, if you meet the filing threshold
  • FinCEN Form 114 – This form, also known as FBAR, requires the reporting of foreign bank and financial accounts if you meet the filing threshold

Filing threshold for Form 8938:

Unmarried taxpayers.

If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Married taxpayers filing a joint income tax return.

If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

If you do not meet the filing threshold, you do not have to file the Form 8938.

--------------------------------------

I have more to add I will get back to you shortly.

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You will report the foreign pension amount on Line 16 of the Form 1040.

If you do not require further assistance with this matter, I ask that you please take the time and scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated. Thank you in advance.

Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,641
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Customer reply replied 7 months ago
Angela,
Thanks a lot! You were most helpful!!
Have a great evening!

You are very welcome. Thank you for the positive rating. I do appreciate it. You have a good evening as well.

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