Foriegn Un-Earned Income?

[Possi]

My client has an income statement from her teaching job in Bucharest that has something new this year. (Actually it is for last year)
1. Salary paid during the 2009 calendar year
2. Retirement paid during the 2009 calendar year

Is Retirement treated the same as Salary?

[Burke]

Publ 525, page 15, states under Foreign Employer: "Nonwage Income: This exemption [from income tax] applies only to employee's wages, salaries, and fees. Pensions and other income do not qualify for this exemption."

[Possi]

thanks!

Thanks so much. I only have 2 foreign earned income people, and this is new.

These are the same ones who have not claimed to be a VA resident for over a decade, since they have been in Romania, and now that their daughter will be going to college here, they want to be a resident! Two yrs ago, they bought a rental property here thinking that would give them a free pass.

NOT.

Thanks for you help. Printed and filed your note.

[Possi]

How to report?

Publ 525, page 15, states under Foreign Employer: "Nonwage Income: This exemption [from income tax] applies only to employee's wages, salaries, and fees. Pensions and other income do not qualify for this exemption."

Do I just put this on 16a? There is not a "form" 1099, and no substitute 1099 as there are with foreign wage income.

I looked up everything I could to find the answer before I came back to the board. Could not find where to report this, or how.

Thanks for any help!

[Burke]

It would go on 16a. Did they pay tax on it in Romania? I was thinking 1116, Foreign Income Tax Credit might apply. Also, did she contribute to her retirement? Then she would have basis -- use simplified general rule. I am assuming this is from an employer retirement plan and not the government -- like Social Security?

[Possi]

Payment or Paid?

It would go on 16a. Did they pay tax on it in Romania? I was thinking 1116, Foreign Income Tax Credit might apply. Also, did she contribute to her retirement? Then she would have basis -- use simplified general rule. I am assuming this is from an employer retirement plan and not the government -- like Social Security?

Let me back up the truck... last year, I took the EURO for USD because I did not have the conversion statement, and I just missed it. Stupid on my part. But now I need to correct it.
She sent the conversion page which states:
1-Salary paid during 2009 calendar year $37,256.00
2-Retirement paid during 2009 calendar year $4526.02
3-Other payments $0.00

TOTAL $41,782.02

So, when I posted this, I also emailed her and asked her if she had retired. She said, "No, I did not.
This is the contribution to my retirement account with Raymond James which was in $USD already converted and included in the tax form.

My actual salary was $37256 instead of the one in EURO. This is the only change needed on the tax forms."

So, if it is not retirement pay, why does it say that, and why is it added to her total salary?

Is she correct, that her actual salary was $37256 and NOT $41782?

[Burke]

I have no idea. Foreign reporting may not be in the same format as ours. You will have to investigate further. It appears that either (1) the employer withheld $4,526.02 from her salary and paid it to RJ, or (2) they paid an additional amt of $4,526.02 to RJ. Either way, it may be taxable or non-taxable depending on the type of retirement acct with RJ. Check with them if you can. But you can amend to recalculate in USD for what was originally reported. Does it matter? It would have all been excluded at that rate.

[Possi]

Doesn't really matter

I agree that it probably doesn't matter, but I think I should find out what kind of retirement it is.
If it is treated like a 401k it's one thing, but if not, it might be included in her AGI and building a basis that I will have to deal with down the road.
Thanks for the chat. It sure helps!