Social Security from another country

[Kea]

I learn so many new things each year by having a client who lives in Colombia. He has a US green card and travels here a few weeks each year to keep it valid.

A few things I want to verify for this year:

Client retired in 2008 and now receives Colombian Social Security. I don't think I should report this on line 20 since none of it should get reduced US tax treatment (he has never paid US tax on the contributions). I suppose that means it should go on line 21 (misc)?

This is the same guy I asked some questions about last year regarding honorarium paid by his employer (a bank) for attending some board meetings. The conclusion last year (granted this was a gray area and may need to be re-visited) was that it was a small compared to his wages and if a US company had paid them they should have included them on a W-2. Last year I did not report it on Sch C. He is now retired, but is still getting the honorarium. I'm still not sure that it rises to the level of something he is doing with a profit motive. The honorarium is about $5000 while the social security is about $36K and the pensions are about $4K.

Since it is no longer a part of his regular job, I guess it now has to go on a Sch C and pay SE tax. Or, can it be considered misc income?

For the (Colombian) pension income, can I just enter the total on line 16b even if there is no 1099-R attached? Will that cause a problem with e-file?

Thanks so much. Maybe some day I can become an expert on US taxes for foreigners and expatriates. I'm obviously not there yet.

[taxtrio]

check for any special treaties between U.S. and his home country. I know there are treaties about foreign social security between U.S. and Canada, and U.K. Maybe there is something specific to his country.

[Kea]

Thanks for reminding me to check again. I haven't found any treaties when I've looked in previous years.

Edit: Nope, still no tax treaty with Colombia.

[joelgilb]

Not a real surprise there. U.S. does not have treaties with certain countries for obvious reasons. South Africa was one for a long time.

Since there is no treaty, I would treat it as misc income on line 21 as you were thinking.

[Kea]

Thanks so much.

[joelgilb]

Interesting that this thread came up at this time. Just got a call from a client with an issue on SS from Ireland. He receives an Irish Soc Sec check and had his taxes prepared by an accountant that showed it in 2007 as Ord Inc. In 2008 had different preparer that tld him that the Irish Soc Sec is not fully taxed in this country due to the treaty. I can see that U.S. taxes vs Ireland, but do not see how the treaty taxes it. 2008 accountant taxed it like U.S. SS so a portion was not taxed.

Any thoughts?

[joelgilb]

bump

Anyone?

[taxtrio]

I believe tax treaty with Canada says canadian soc sec treated the same as U.S. social security.

U.K social security is 50 percent taxable on U.S. return.... don't know about Ireland.

[Gail in Virginia]

I believe tax treaty with Canada says canadian soc sec treated the same as U.S. social security.

U.K social security is 50 percent taxable on U.S. return.... don't know about Ireland.

Geography was never my strongest subject, but isn't Ireland part of the UK? Just like Great Britain, Wales and Scotland? Or is it more separate like Jamaica?

[lbbwest]

Interesting that this thread came up at this time. Just got a call from a client with an issue on SS from Ireland. He receives an Irish Soc Sec check and had his taxes prepared by an accountant that showed it in 2007 as Ord Inc. In 2008 had different preparer that tld him that the Irish Soc Sec is not fully taxed in this country due to the treaty. I can see that U.S. taxes vs Ireland, but do not see how the treaty taxes it. 2008 accountant taxed it like U.S. SS so a portion was not taxed.

Any thoughts?

Go to the Ireland Tax Website, that last time I looked (a couple of years ago) it was quite thorough, the tax rates are unbelievably high!! My gut feeling is that if they didn't withhold in Ireland he's probably free there, how is he filing in the US? Resident alien? Partial year???? it all makes a difference. lbb

[joelgilb]

Geography was never my strongest subject, but isn't Ireland part of the UK? Just like Great Britain, Wales and Scotland? Or is it more separate like Jamaica?

I always thought so also, but the U.S. definitely has a separate tax treaty with Ireland.

[joelgilb]

Go to the Ireland Tax Website, that last time I looked (a couple of years ago) it was quite thorough, the tax rates are unbelievably high!! My gut feeling is that if they didn't withhold in Ireland he's probably free there, how is he filing in the US? Resident alien? Partial year???? it all makes a difference. lbb

Thanks, but I looked there and its really not pertinent.

Irish Social Security is not being taxed in Ireland. He is a U.S. citizen and the treaty deals with the Irish Social Security directly, so it will be taxed here. This, per treaty, is so the the country of residence will tax to avoid the double taxation between the countries.

So the only issues are:

1. How will the U.S. tax it?

a. The same as U.S. SS? Which is how I believe it should be taxed; or

b. In some other fashion?

2. If, as taxtrio suggests, it is taxed like the U.K. and Canada the same as U.S. SS, (which I believe to be the case) then where is it reported?

a. my guess here is it needs to be reported as Other Income and the S.S. calculation will need to be done manually.