Foreign income

[Cyclone]

This is a weird one I have not come across before.

 

I have a client who brought their parents over from Jordan in Feb 2013.  The parents are US Green Card Holders (permanent residents).

 

The only income the parents had for 2013 was from the husband's Social Security in Jordan.  Jordan did not withhold any Jordan taxes on the income.  The total social security income received (after converted to US dollars) amounts to about $27,500.

 

The parents do not have a house in Jordan and will be living in the US going forward.

 

I did some research and attached what I found.   It says that Foreign Social Security payments are generally taxable by the country making the payments (which would be Jordan).

 

The US does NOT have a tax treaty with Jordan.  

 

It appears that if I file a US 1040, the income is reported on Line 16a (Pensions) with a code FEP next to it.  This results in them owing about $ 800 since no Jordan taxes were withheld and therefore I do not believe they qualify for any Foreign tax credits to offset that.

 

I am thinking that a Jordan tax return needs to be filed to report the income and a US tax return is not required.  If a Jordan tax return is not filed then I am concerned Jordan could come after them wanting their revenue.  I would request the parents contact someone in Jordan to complete that return if one needs prepared.

 

Has anyone had any experience with Foreign social security?

 

 

Taxation of Foreign Pensions.pdf