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Mail Bag #11: Social Security Tax in Belgium, Mexican Pension Survivorship, Lump Sum Pension Withdrawal, UK Share Options, Swedish & Libyan Tax Queries

Mail Bag #11: Social Security Tax in Belgium, Mexican Pension Survivorship, Lump Sum Pension Withdrawal, UK Share Options, Swedish & Libyan Tax Queries
Ines Zemelman, EA
18 December 2017

US Social Security in Belgium

I have Social Security from USA and IRA. I live in Belgium - how is it taxed?

The US Social Security will be taxable only in the US. The IRA distributions will be taxable in the US. Whether it is also taxable in Belgium depends on your residency status in that country (citizen, permanent resident or nonresident). If any part of your pension income is taxed by both tax authorities, you will be able to take a tax credit to eliminate double taxation.

The tax rate on social security benefits and IRS distributions will depend on the total taxable income of the retiree. If total income is below the taxable level then plan distributions will remain tax-free for the recipients.

Of course, we will determine the best way to strategically optimize your return during tax preparation.

Mexican Pension Survivorship

My wife is a non resident alien living in Mexico. I’m a U.S. citizen and will be receiving a pension from the company I work (non government Pension). In the event of my passing, will she be able to receive my pension as a survivor? The Plan allows this under “normal” conditions, i.e., married, legal resident alien and has a SSN assigned. My wife has an ITIN assigned. Due to IRS law, she will have to file end of year earnings, etc. Will the ITIN suffice or will she have to apply for permanent residency in the U.S. to receive any benefits?

One major concern of US Citizens with a Non-US Spouse is whether or not the spouse will be able to collect survivor benefits once the US Citizen passes away.

Please see our articles on this very topic ---- social security survivor benefit analysis.

Lump Sum Pension

I am a US citizen and reside in the United States.

30+ years ago, I was employed by the Saskathewan, Canada government.

I have a pension Plan with the Saskathewan government and am trying to understand the tax implications of a pension disbursement.

My lean now is to cash in on the pension, take the lump sum, pay Canadian federal taxes and incur the costs to convert the Canadian dollars into US dollars. I’m trying to understand what other costs are associated with this approach, i.e. do I also pay US federal , as well as, California state taxes on this Pension if taken as a lump sum.

Account distributions are required to be reported using a taxpayer’s US tax return, just as they are on a Canadian income tax return.

Any tax paid to Canada will be applied to your US tax return so you will not be double taxed if your return is prepared correctly. Most likely this pension will be also taxed in California is this is the state where you reside at the time of income distribution.

UK Share options

I am a British Citizen living in Illinois as a permanent resident (green card holder) and am married. My employer in the UK is selling the business - I work in the US branch and am a shareholder within their UK Share Options scheme. I need advice on the following and wondered if your firm are experts in this:
1. Paying capital gains tax - do I pay in the UK or US? are both the same 20% rate, and how do I ensure that I don't end up being taxed twice
2. Receipt and transfer of the money from the UK to the US
3. Preparation of my tax return at the end of this year in the US which will include the receipt of money from the corporate sale and share options payment I will receive (due in about 3 months)

You won't pay double tax. Any tax you pay to the UK will count towards your US tax. We will handle this for you during tax prep.  We would gladly handle your U.S. tax reporting needs and will provide you with tax advice most suitable to your situation.

Swedish Permanent Resident

Hello. I have been living in Sweden the past 12 years and have not filed my US taxes during this time. I am a US citizen and a Swedish permanet resident(I don't hold Swedish citizenship). I was under the impression as I haven't had work and no income I wouldn't need to file but I now have been told this might not be the case. I own no assests, car, house, savings, stocks, bonds, etc. The only financial link I have is my bank account which I get parenting money in from the government every money just a bare minimum. I do not have any steady income or work. I have a Swedish husband and 3 boys who are dual citizens. I was wondering if you could please advise me what sort of filing would be expected of me, roughly what the fees would be and is there any way to claim child dependency for my 3 children? I look foward to hearing back from you.

If you did not meet the minimum filing requirement, you were not required to file. You are not required to report "child dependency" . However, if your children who are dual citizens have bank accounts opened in their name over which you or your husband has a custody, the kids have US filing obligation. You as their parent must file FBAR (foreign bank account report) for your children if the total balance on each child name is $10K or more.

If your children do not have accounts but you are the account holder (i.e. owner/joint owner) or have signature authority over any foreign bank account (this includes checking or savings accounts, mutual funds, brokerage accounts, unit trusts, and other types of foreign financial assets), it may be possible that you are required to report the account yearly to the United States Department of Treasury.

Under the Bank Secrecy Act, each United States person must file a Foreign Bank Accounts Report (FBAR), or FinCEN Form 114 if the combined total of your foreign financial accounts is at least $10K or reaches this threshold at any point during the calendar year. The US treasury requires that US Citizens/GC Holders remain current and compliant with FBAR requirements for the last 6 years. Your filing option depends on whether you had non-reported interest from foreign bank accounts and whether you are subject to additional reporting requirements.

Libyan employment

I worked 2016 in Libya.. filed my tax (income $ 24655). have three us children & I got nothing back. Am I eligible for child refund? Can you do that for me?

Until 2015, we have processed refundable child credit of $1,000 for each child to all expats with earnings under $100k. There was a small trick that enabled the credit regardless of the foreign earned income exclusion.

Now - the wrinkle.

As of that year, the IRS has changed this ruling and disallowed this.  If you utilize the FEIE, you cannot get the child credit. We'll handle this for you during tax preparation. If you pay income tax in Lybia there is way to get you additional child credit (refund).

Ines Zemelman, EA
founder of Taxes for Expats